•"Reduce fiscal deficits by 3% "- IMF advises Nigerian, other African nations on potential debt crises
Yesterday, the International Monetary Fund (IMF) urged Nigeria and other Sub-Saharan African nations to reduce their fiscal deficits by 3% to avert potential debt crises.
This call was made within a report titled "How to Prevent a Debt Crisis in Sub-Saharan Africa," authored by a team of IMF experts led by Fabio Comelli, a senior economist in the IMF's African Department.
The report outlines five key policy measures that Nigeria and other African governments can adopt to safeguard the sustainability of public finances while pursuing their developmental objectives.
In 2022, Nigeria's fiscal deficit to Gross Domestic Product (GDP) ratio declined to 5% from the previous year's 6.3%. Nevertheless, the World Bank forecasts this ratio to reach 5.4% in the current year and rise further to 5.8% by 2015. To address this concerning trend, the IMF provided guidance to Nigeria and other Sub-Saharan nations facing similar challenges. This guidance comprises:
1. Establishing a credible medium-term fiscal policy strategy.
2. Undertaking fiscal adjustments to bring debt levels to safer thresholds.
3. Increasing domestic revenue mobilization efforts.
4. Strengthening budgetary institutions to enhance fiscal plan implementation.
5. Anticipating and addressing public resistance to necessary reforms.
Regarding the imperative to reduce fiscal deficits, the IMF report emphasized that IMF staff analysis indicates that most countries in the region must reduce their fiscal deficits in the coming years. On average, this adjustment would amount to 2 to 3 percent of GDP.
The report also highlighted that some countries in Sub-Saharan Africa still possess fiscal space, allowing them to maintain or even augment crucial investments in human and physical capital.
Conversely, a few nations face substantial adjustment needs, where fiscal consolidation alone might not suffice, necessitating potential debt reprofiling or restructuring.