Enterprise Television- IMF Advises Nigeria, Others to Build Buffers Against Sudden Shocks
The International Monetary Fund (IMF), has advised Nigeria as well as other income countries to build fiscal buffers to help them wade through sudden challenges.
The Director of Fiscal Affairs Department, IMF, Vitor Gasper, made the call Wednesday at the Fiscal Monitoring press briefing at the ongoing 2018 Spring Meetings in Washington DC.
He said, “when we insist that low income countries should be improving their tax revenue mobilisation, we see that as an instrument of sustainability and development. “In that context, higher tax capacity could also help sustain debt service. But that is not an end. The end in itself is the ability to stand on priority areas – health, education, public infrastructure, among others.
“Governments are well advised to build fiscal buffers so that they are ready to tackle challenges that would inevitably come.”
For her part, Catherine Pattillo, Assistant Director, Fiscal Affairs Department, IMF, noted: “I think we can all agree that for sub-Saharan African countries that sustained development and increasing per capita income roof, which is built on macro stability is the main priority and the fund has been working with African countries to help build tax capacity so that countries can sustain levels of public debt and also mobilise spending for health, education, infrastructure. So the composition of borrowing in countries is changing as you mentioned, and those rising public debts are changing in composition and creating some vulnerabilities and risks.
“Borrowing by countries can create benefits if used for investments of high returns. Our evidence suggests that’s not the case in some countries so rising debt then creates the vulnerabilities. There will be interest rate risks, market risks and large interest burdens that will squeeze out spending priorities. With high debt, countries need to deliver on their fiscal plans for adjustments and use borrowed funds for high return on investments.”
Speaking on Nigeria’s high debt serving rate now at 63 per cent, she said there was need to spend more on infrastructure and social safety nets, among others.