The International Monetary Fund (IMF) has called for more savings from crude oil revenue to improve Nigeria’s budget deficit and funding.
The IMF Divisional Chief, Fiscal Affairs Department, Paulo Medas spoke during the Fiscal Monitor briefing at the ongoing IIMF /World Bank annual meetings in Washington DC.
He noted that while Nigeria has benefited from higher oil revenues, the fund has not seen an improvement in the deficits as expected because of the large energy subsidies, oil production and 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,” he said.
“In the case of Nigeria, where the priority is really domestic revenue mobilisation you need to increase the state capacity to address the needs of the country. And this will also help make fiscal policy work consistently in efforts to ensure economic stability.”
On the disparity in fiscal and monetary polices, he noted that “governments are facing a very difficult environment where you can in many countries they have 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. 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.”
On his part, Director, Fiscal Affairs Department at the IMF, Vitor Gaspar, noted that 19 of the 35 low income countries in Africa are in debt distress as more than 120 million people on the continent do not have enough food to eat.
“According to estimates by the World Bank, 11 million more people would enter extreme poverty now than what should have been expected under present trends. 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. Governments are facing double digit inflation, 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. Where do you think fiscal policy should set the priorities and focus on three key elements?
“One is obviously to the resources and the most urgent needs. That is the food crisis. This has to be done, together with the international community. Secondly, Africa already before the pandemic, has a very low level, tax ratio to GDP. 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 on 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,” he said.
Credit: thenationonlineng.net
