IMF Managing Director, Kristalina Georgieva

 

The International Monetary Fund (IMF) says that Nigeria and other sub-Saharan countries need to implement fiscal consolidation plans as economic diversification offers a path to growth.

Senior Resident Representative and Mission Chief for Nigeria (Africa Department) of IMF, Mr Amine Mati who spoke at a public launch of its regional economic outlook in Abuja on Thursday noted that Nigeria would spend at least 60% of its revenues in 2017 to service public debts.

While observing that the region is imbued with significant potential for raising revenues, the Outlook concluded that diversification offers a path to growth.

According to him, in Nigeria, Angola and Gabon, which are oil producing economies, debt servicing costs are becoming a burden.

The IMF said that public debt rose above 50 per-cent of gross domestic product (GDP) in 22 sub-saharan African countries at the end of 2016.

He observed that fiscal pressures that are beginning to materialize in several fast-growing non-resource intensive countries, pose risks to the weakened financial sector in Nigeria and other sub-Saharan Africa countries.

This he explained are partly reflecting security developments and a decline in cocoa prices, siting Côte d’Ivoire and fiscal slippages during the election as in Ghana and Kenya.

Unveiling the report “Fiscal Adjustment and Economic Diversification” Mark lamented that debt stocks have risen throughout the region, although exchange rates pressures have eased in many countries.

Although the IMF pointed out that fiscal pressures pose risks to an already weakened financial sector, it said fiscal consolidation plans needed to be implemented in the region.

The IMF stressed that the economies in the region are driven by large fiscal deficit and depreciation while debt stocks have risen throughout the region.

The multilateral financial institutions also revealed that debt stocks have risen throughout the region while debt service costs have increased.

It pointed out that what the region required was getting the policy mix right and playing to their strengths.

But the IMF noted that the region recorded a modest growth recovery but added that the recovery is not sufficient to raise the gross domestic product (GDP) per capita in many countries of the region.

The IMF also noted that growth has picked up but is set to remain subdued.

It stated positively that oil exporting economies like Nigeria are recovering at the same time that inflationary pressures are receding. It therefore forecasts a GDP growth of 2.6 per-cent in 2017.

“Broad-based slowdown in sub-Saharan Africa is easing, but the underlying situation remains difficult. He revealed that growth is expected to pick up from 1.4 per-cent in 1016 to 2.6 per-cent in 20117 reflecting the one-off factors particularly the rebound in Nigeria’s oil and agricultural production, the easing of drought conditions that impacted much of eastern and Southern Africa in 2016 and early 2017 and a more supportive external environment”

“While 15 out of 45 countries continue to grow at 5 per-cent or faster, growth in the region as a whole will barely surpass the rate of population growth and in 12 countries, comprising over 40 per-cent of sub-saharan Africa’s population income per capita is expected to decline in 2017.

A further pick-up in growth to 3.4 per-cent is expected in 2018 but momentum is weak and growth will likely remain well below past trends in 2018.

“Ongoing policy uncertainty in Nigeria and South Africa continues to restrain growth in the regions two largest economies.

“Excluding these two largest economies, the average growth rate in the region is expected to be 4.4 per-cent in 2017 rising to 5.1 per-cent in 2018-19.

“But even where growth remains strong, in many cases it continues to rely on public sector spending, often at the cost of rising debt and crowding out of the private sector,” the IMF said.

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