IMF warns Nigeria, other SSA countries; identifies four policy priority areas
By Jeph Ajobaju, Chief Copy Editor
Sub-Saharan Africa (SSA) is currently “living on the edge”, says the International Monetary Fund (IMF) in its latest regional economic outlook which cites geopolitical tension, monetary tightening, and food price inflation.
The IMF identifies four policy priority areas as different countries explore options to navigate challenges.
It urged African governments to address food insecurity, manage the shift in monetary policies, consolidate dating public finances, and set the stage for sustainable and greener growth.
The report puts SSA debt to Gross Domestic Product (GDP) ratio in 2022 at 24.1 per cent and in 2023 at 23.8 per cent.
The ratio averaged 15.3 per cent from 2010 to 2018 but rose to 22.8 per cent in 2019 and 26.5 per cent in 2020 amid the coronavirus pandemic.
It closed in 2021 at 24.6 per cent. Nigeria’s debt to GDP ratio is among the least in the region at 9.1 per cent. The figure was 3.1 per cent from 2010 to 2018.
But Nigeria’s debt to GDP ratio is expected to climb to 38.6 per cent in 2023, from 37.3 per cent in 2022.
It was 36.6 per cent in 2021. That of entire SSA was 57 per cent but it is expected to come down to 53.7 per cent in 2023.
Nigeria’s debt to GDP ratio is rising while those of the rest of African countries are reducing.
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Debt to GDP ratio
The IMF also projects Nigeria’s fiscal deficit to GDP ratio to close this year at 6.2 per cent of GDP (higher than SSA average projected at 4.5 per cent) and scale down to 5.8 per cent next year, per reporting by The Guardian.
The figure was 6 per cent last year, against 3 per cent averaged from 2010 to 2018.
“On public debt, regional indebtedness is now approaching levels last seen in the early 2000s before the impact of the Heavily Indebted Poor Countries Initiative, though with a different composition,” the IMF said.
“The substitution of low-cost, long-term multilateral debt with higher-cost private funds has resulted in rising debt-service costs and higher rollover risks.
“Nineteen of the region’s 35 low-income countries are in debt distress or at high risk of distress.
“Out of the other ten countries of the region, three have faced spreads of more than 1,000 basis points at some point over the past six months (Angola, Gabon, Nigeria),” the report states.
It noted the price crisis in SSA mirrors worldwide trends “where inflation has increased more rapidly and more persistently than expected, and where incomes have been squeezed by hikes in the cost of living.
“Recent inflation increases may appear less striking relative to historical averages for sub-Saharan Africa, especially for countries with fixed exchange rates, but much of the recent movement has been driven by essential food and energy items, which are imported in many countries and average 50 per cent of the region’s consumption.”