Obinna Chima and Nume Ekeghe
The International Monetary Fund (IMF) wednesday advised Nigeria not to spare any resources in curbing the spread of COVID-19.
IMF’s Director, Africa Department, Mr. Abebe Selassie, said during a media briefing yesterday, to unveil the ‘IMF Regional Economic Outlook for sub Saharan Africa,’ at the ongoing World Bank/IMF Virtual Spring Meetings in Washington, United States, that the Nigerian economy was among those to be hard hit by the pandemic.
He urged the federal and state governments to roll out more fiscal measures to fight the virus, which has continued to spread in the country.
“In the near term, no resources should be spared to put the health crisis threat that Nigeria faces from the COVID-19 pandemic. So, we see scope for more supportive policies on the fiscal side,” he stated.
He added that the federal government has requested for support under the multilateral institution’s Rapid Financing Instrument, which he said was a very quick dispensing resource that the government can use to strengthen health spending to provide social protection to people.
“There is also scope for having an exchange rate policy framework that would be supportive of this fiscal stance. So, we look for those policies to be adopted to support Nigeria to put this crisis behind it,” he said.
The IMF had on Tuesday predicted a negative Gross Domestic Product (GDP) of -3.4 per cent for Nigeria in 2020, due to the ongoing disruptions caused by the COVID-19 pandemic.
In the latest ‘Regional Economic Outlook for Sub-Saharan Africa titled: “COVID-19: An Unprecedented Threat to Development,” the IMF noted that Africa was facing unprecedented health and economic crises which threaten to throw the region off its stride, reversing the development progress of recent years.
It stated that by exacting a heavy human toll, upending livelihoods and damaging business and government balance sheets, the crisis could retard the region’s growth prospects in the years to come.
According to the fund, no country in the region would be spared while the rapid spread of the virus, if left unchecked, could overwhelm weak healthcare systems.
“As a result, the region’s economy is projected to contract by −1.6 per cent this year—the worst reading on record, a downward revision of 5.2 percentage points from our October 2019 forecast. Across countries, the less diversified economies will be hit the hardest, reflecting the impact of lower commodity prices and containment efforts.
“Among the non-resource-intensive countries, those that depend on tourism are expected to witness a severe contraction because of extensive travel restrictions, while emerging market and frontier economies will face the consequences of large capital outflows and tightening financial conditions.
“The large adverse shocks will exacerbate social conditions and aggravate existing economic vulnerabilities. The measures that countries have had to adapt to enforce social distancing are certain to imperil the livelihoods of innumerable vulnerable people,” it added.
The IMF stated that given the limited social safety net available, “people will suffer.”
“Moreover, the pandemic is reaching the shores of the continent at a time when budgetary space to absorb such shocks is limited in most countries, thus complicating the appropriate policy response.
“The COVID-19 pandemic threatens to exact a heavy human toll, and the economic crisis it has triggered can upend recent development progress. The policy priority is to ramp up health capacity and spending to save lives and contain the virus outbreak.
“Support from all development partners is essential to address the sizable financing needs, including debt relief for the most vulnerable countries. • Fiscal, monetary, and financial policies should be used to protect vulnerable groups, mitigate economic losses, and support the recovery. Once the crisis subsides, fiscal positions should return to sustainable paths,” it added.
The IMF explained that decisive measures are needed to limit humanitarian and economic losses and protect the most vulnerable societies in the world.
“The immediate priority is for countries to do whatever it takes to ramp up public health expenditures to contain the virus outbreak, regardless of fiscal space and debt positions.
“Fiscal policy, sizable, timely and temporary fiscal support is crucial to protect the most affected people and firms, including those in the informal sector. Policies could include cash or in-kind transfers to help people under strain (including through digital technologies) and targeted and temporary support to hard-hit sectors. “Once the crisis has subsided, countries should revert fiscal positions to paths that ensure debt sustainability,” the report added.
IMF said Africa could reverse an economic contraction linked to fallout from the COVID-19 pandemic in 2021.
It, however, warned that firm forecasts are currently hard to make, adding that in the event of a more protracted disease outbreak and deeper global recession, it envisions Africa’s economy shrinking an additional 2.5 per cent this year.
“I don’t think we’ve ever had as difficult a time trying to do projections in the institution, certainly in my 25 years,” Selassie added.
IMF to Give $11bn to 32 African Countries
Selassie also said the IMF was set to provide $11 billion to 32 countries in Africa that had requested for assistance in fighting the pandemic.
This, he said, the IMF and its partners – the World Bank, World Health Organisation (WHO), the African Development Bank (AfDB) and the African Union (AU) – believed would support domestic measures, including transfers to vulnerable households, monetary and fiscal policy responses.
The fund has already disbursed money to Burkina Faso, Chad, Gabon, Ghana, Madagascar, Niger, Rwanda, Senegal, and Togo.
The $11 billion for countries in the region would be financed through its rapid-disbursement instruments and debt-relief support of about $300 million that would be provided this year, Selassie added.
Globally, the IMF has approved debt-service relief for 25 poor countries to support emergency medical and relief efforts.
“Together with the World Bank, the IMF is also making the case for debt relief from official bilateral creditors for those low-income countries that request forbearance,” Selassie added.
According to him, in addition to existing support, the fund would be looking for resources to provide grants to countries with debt-service payments that fall due to the IMF for the remainder of the year.
He said the move was intended to offset debt-service costs and create fiscal space for countries to respond to health needs.
Restrictions to limit the movement of people and real per-capita income that is projected to fall by 3.9 per cent on average across the region will worsen existing vulnerabilities and jeopardise livelihoods at a time when policy makers have limited fiscal scope to respond, Selassie added.