IMF lists priority measures for debt reduction in Nigeria

•Urges more resources to address food crisis

THE International Monetary Fund, IMF yesterday said increasing revenue mobilisation and leveraging high crude oil price to increase state capacity remained top priorities for reducing government borrowing and public debt in Nigeria. “Divisional Chief, Fiscal Affairs Department IMF, Paulo Medas, made  this recommendation yesterday in Washington on the sidelines of the ongoing annual meetings of the World Bank and IMF.

He spoke at the press briefing on the IMF Fiscal Monitor report released at the annual meetings, which recommended tight fiscal policy in support of monetary policy efforts to tighten money supply to curb inflation. Governments are facing a very difficult environment where in many countries they have double digit inflation and in this aspect, fiscal policy needs to help monetary policy working together to ensure price stability.

“This is absolutely critical for stable growth and for some public finances in the countries,” he said.“Paulo Medas stressed that this is also applicable to Nigeria, adding that instead of pursuing an expansionary  fiscal through additional borrowing which worsens the fiscal deficit and debt levels, the Federal Government should prioritise domestic revenue mobilisation via tax revenue as well as leverage on higher crude oil prices to reduce debt and increase its capacity to provide critical needs.“ Medas  said: “Countries like Nigeria especially that are oil exporters can take advantage of rising commodity revenues to address some of these needs and to reduce debt.

“Nigeria has benefited from higher oil revenues. We haven’t seen an improvement in the deficits as we hoped, partly because of the large energy subsidies, but also other issues with the production of oil and other pressures on the budget.  “

“So, our recommendation is to try to save some of these oil revenues but also address these emergency needs. Another aspect I would say is that Nigeria is one case where tax revenues are really low and this really undermines the capacity of the government to mark these types of shocks and to provide key services.”

Tackle food crisis

Also speaking Vitor Gaspar, Director, Fiscal Affairs Department, IMF, stressed that in addition to the above Nigeria and other African countries must urgently direct resources to address the problem of food insecurity, improve social safety nets while also improve quality of government spending by reducing waste.

He said: “The food crisis is another devastating effect. Some estimates indicated more than 120 million people in Africa alone are suffering from food insecurity. They don’t have enough to eat. So this is a very, very serious situation. The governments are facing double digit inflation and many countries are facing very high debt. Many countries are facing debts similar to the early 2000s when they had debt relief. In our analysis 19 out of 35 low income countries in Africa are already in debt distress or at risk of debt distress.

So this is really a very difficult context for governments. We think fiscal policy should set the priorities and focus on three key elements.

“One is obviously putting resources in the most urgent needs. That is the food crisis. This has to be done, together with the international community.

Secondly, Africa already has a very low level of  tax to GDP ratio. These levels have deteriorated so when you look now, compared to the pre pandemic trends, we have seen a natural decline in tax ratios. This makes it much harder for governments to manage debt, provide basic services such as education and health and infrastructure. So it is important to step up the efforts on domestic revenue mobilisation and building state capacity to respond to these challenges.

Improving the quality of spending and reducing waste are important areas but more importantly, the need for improved social safety nets, which help governments better target those in need while reducing inefficient and wasteful spending.”