Says fiscal pressure poses risk to financial sector Forecasts 2.6% growth for sub-Saharan Africa
Ndubuisi Francis and Udora Orizu in Abuja
The International Monetary Fund (IMF) has warned that debt servicing costs are becoming a burden, especially in oil-producing countries, noting that such costs were expected to absorb over 60 per cent of government revenues in 2017 in Nigeria, Angola and Gabon.
The IMF stated that public debt rose above 50 per cent of Gross Domestic Product (GDP) in 22 sub-Saharan African countries at the end of 2016.
In its regional economic outlook which was unveiled in Abuja yesterday, the IMF noted that fiscal risks are also beginning to materialise in several fast-growing non-resource intensive countries, partly reflecting security developments and a decline in cocoa prices, citing Côte d’Ivoire, as well as fiscal slippages during elections as in Ghana and Kenya.
Unveiling the report titled “Fiscal Adjustment and Economic Diversification”, the Senior Resident Representative and Mission Chief for Nigeria (Africa Department ) of IMF, Mr. Amine Mati, said fiscal consolidation plans needed to be implemented in the region, adding that diversification offers a path to growth.
According to the IMF, fiscal pressures pose risks to the weakened financial sector in Nigeria and other sub-Saharan Africa countries.
Noting that debt stocks have risen throughout the region, the IMF stated that exchange rates pressures have eased in many countries, citing the case of Nigeria.
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.
According to the IMF, diversification offers a path to growth, adding that the region is imbued with significant potential for raising revenues.
The IMF stressed that the countries’ economies 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 capital in many countries of the region.
The IMF also noted that growth have picked up but was set to remain subdued.
While stressing that oil exporting economies like Nigeria were recovering, the IMF also noted that inflationary pressures are receding.
It forecast a GDP growth of 2.6 per cent in 2017 for sub-Saharan Africa.
“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 2016 to 2.6 per cent in 2017, 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 2019. 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.