IMF Issues Warning To Nigeria, Others Over Rising Foreign Debt
The International Monetary Fund has warned Nigeria and other oil-exporting countries over rising foreign debts, saying there is a need to make external borrowings sustainable.
Speaking yesterday at the ongoing World Bank/IMF Annual Meetings in Washington D.C, IMF Director, Monetary and Capital Markets Department Tobias Adrian, lamented that external borrowing in emerging markets and low-income countries, which includes Nigeria, is rising.
The Fund, however, commended Nigeria for the recent reforms aimed at reducing infrastructure gap in the country, adding that it was in support of the measures.
President Muhammadu Buhari has requested the National Assembly to approve a request to borrow $5.5 billion.
The Federal Government has so far raised $1.5 billion through Eurobond this year and another N100 billion through Sukuk bonds already invetsed in infrastructure funding.
The Assistant Director, Fiscal Affairs Department, IMF, Mrs. Catherine Pattillo, gave the warning and commendation on the sidelines of the release of the Fiscal Monitor Report by the Fund in Washington DC, United States, on Wednesday.
Pattillo said, “The concern in a number of oil exporters is that unless there is action now, that debt, which has been rising in many countries, is a concern particularly because of the interest payments.
“So, if you have continuing rise in debt, the interest payments will rise, and then, it will consume a large part of any revenue that you collect and you won’t be able to use that revenue for the objectives of the economic growth and recovery programme, and increasing growth and employment.
“So, for ensuring that you have the ability to use those revenues for enhancing expenditure, there is a need to make sure that debt is sustained and interest to revenue is kept at a reasonable level.”
She, however,revealed the need to increase non-oil revenue collection in the country.
Specifically, she stated that Nigeria needed to enhance its non-oil revenue collection such that its external borrowings, which have been largely channelled to infrastructure growth, would not create future debt crisis.
Patillo said, “There is a lot of positive reforms in Nigeria and those are welcomed, including to reduce the infrastructure gap, particularly in the power sector.
“But really, more needs to be done is our massage. There is a need for urgent actions for front-loaded fiscal consolidation through mobilising more non-oil revenue. Right now, non-oil revenue collection in the first part of the year was only half of what was budgeted and there is an expectation that the trend might continue for the second part of the year. And if so, that will continue to widen the deficit and make interest payments to revenue to stay very high in around 60 per cent, which is quite striking.
“So, the message is front-loaded fiscal consolidation, emphasise non-oil revenue mobilisation and there are certain measures both on the tax and spending that the IMF team have been emphasising on.”
Meanwhile the acting Country Director for World Bank Nigeria, Mr Khairy Al-Jamal reiterated the World Bank’s commitment to working with Nigeria to achieve a robust inclusive and sustainable growth.
Al-Jamal said that the bank was committed to support the Federal Government to improve its water, roads, education and health infrastructure as well as other services to poor and vulnerable people.
He also said the World Bank was assisting Nigeria in the aspect of domestic resource mobilisation, through the expansion of its revenue base and to improve efficiency in tax collection.