Economic Crisis: IMF Suggests Policy Adjustment to Boost Trade in Nigeria, Others

  • We have credible plan to exit recession, insists Adeosun

Chika Amanze-Nwachuku and Obinna Chima in Washington D.C

Worried by economic crisis across many countries of the world, the International Monetary and Financial Committee (IMFC) of the International Monetary Fund (IMF) yesterday advised Nigeria and other countries hard-hit by persistent decline in their terms of trade to proceed with policy adjustment in order to correct the imbalance.

The advice came just as the Finance Minister, Mrs. Kemi Adeosun, reassured Nigerians and the international community that Nigeria had a credible recovery plan to lift the economy out of recession.

Reading a communiqué at the end of the 34th meeting of the IMFC at the on-going IMF-World Bank meetings in Washington D.C, the chair of the committee/Governor of the Bank of Mexico, Mr. Agustín Carstens, also noted that excessive volatility and disorderly movements in exchange rates could have adverse implications for economic and financial stability

Besides, Carstens noted that, the IMFC reinforced the commitment of member states to strong, sustainable, inclusive, job-rich, and more balanced growth.

According to him, the IMFC would use all policy tools—structural reforms, fiscal and monetary policies—both individually and collectively, to tackle the wave of soft economic growth across the globe.

“We are strengthening policies to bolster confidence and resilience, safeguard financial stability, and ensure that all members of society have the opportunity to benefit from globalisation and technological change. We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes.

“We reaffirm our commitment to communicate policy stances clearly and resist all forms of protectionism. We will also redouble our commitment to maintain economic openness and reinvigorate global trade as a critical means to boost global growth,” he added.

Carstens explained that Nigeria and other economies facing challenges should use fiscal policy flexibly and make tax policy and public expenditure more growth-friendly, including by prioritising high-quality investment, while enhancing resilience and ensuring public debt as a share of GDP should be on a sustainable path.

He stressed that appropriate and credible fiscal policies along these lines would support growth, job creation, and confidence. “Well-designed tax structures, as well as income policies where appropriate, can promote stronger growth, protect the vulnerable, and reduce inequality.”

Furthermore, the committee wanted the IMF to continue efforts, in cooperation with other relevant international organisations, to help countries meet the 2030 Sustainable Development Goals and to integrate deliverables under the post-2015 development agenda into the IMF’s work.

According to him, work on low income countries (LICs) should focus on continued efforts to support growth and boost resilience in fragile states, and on helping countries hardest-hit by commodity price shocks, including by designing a consistent set of policies that support growth.

“We call on the IMF to support LICs in their efforts to address investment needs, and provide advice on striking the appropriate balance between financing development needs and preserving debt sustainability. In this context, we support the work in progress to review the debt sustainability framework for LICs.

“We look forward to discussions on how to enhance countries’ access to precautionary financial support and reviewing current practices in regard to blending resources between the General Resources Account and the Poverty Reduction and Growth Trust (PRGT) under IMF programs. We look forward to the findings of the forthcoming review of social objectives in PRGT-supported programs.

“We welcome the extension of zero interest rates on all IMF concessional lending facilities for at least the next two years, through end-2018. We welcome the support received so far, including by new contributors, to mobilize additional loan resources for the PRGT, and call on members’ further support to the successful conclusion of these efforts,” the IMFC added.

Meanwhile, Adeosun explained that the plan put in place to get the economy out of recession and getting it back to growth included more capital expenditure, overhead cost-cutting and getting out of the inefficient cash calls in the oil industry.

She told The Banker in an exclusive interview at the side-lines of the IMF-World Bank Annual Meetings in Washington DC that the basic fundamentals of the Nigerian economy were strong, explaining that the current situation was short-term. “We will get back to growth,’” she emphasised.

According to a statement signed by the Director of Information, Ministry of Finance, Salisu Na’inna Dambatta, the minister noted that the country had challenges in the low prices of oil and quantity produced. She added that production was improving.

On the Eurobond, Adeosun said an open competitive tender, evaluation was going on and there were very strong commitments to raise the US$ 1 billion sought, assuring that Nigeria had a sensible debt strategy.

“The money will go into infrastructure, specifically roads, which will help to stimulate the economy and boost growth,” she said.