The International Monetary Fund (IMF) has said the Federal Government could spend as much as 92.6 per cent of its revenue on debt servicing this year. This is contained in its 2021 Article IV, which was released yesterday.
It also estimated last year’s debt servicing-to-revenue ratio at 85.5 per cent. The IMF 2020 debt-serving-to-revenue-ratio projection is higher than the 90 per cent forecast given by Agusto & Co.
As at the end of September, 2021, debt-servicing-to-revenue ratio stood at 76 per cent, implying that 76 kobo out of every N1 earned by the government was spent on payment of interest on debts.
IMF’s latest statement estimates the debt-servicing-to-consolidated revenue (total revenues of the government and its agencies) for 2021 and 2022 at 29 and 32.8 per cent respectively.
It also projects the public debt to grow by 117.8 per cent on a year-on-year basis in 2022, just as inflation is to grow at an average rate of 14.3 per cent. Headline inflation rate closed last year at 15.63 per cent.
The Fund expects the country’s revenues and grants in the year to cap at seven per cent of total output. Last year’s rate was estimated at 7.4 per cent, which is much higher than 6.3 per cent achieved in 2020.
The report said the country’s “economy is recovering from a historic downturn benefitting from government policy support, rising oil prices and international financial assistance.”
It pointed out that insecurity and poor COVID-19 vaccination were major factors challenging the country’s economic growth, stressing that “worsening violence and insecurity could also derail the recovery.”