July 14, 2023

The International Monetary Fund (IMF) says increasing well-targeted social spending will be critical to mitigate the impact of the removal of fuel subsidies on the most vulnerable in Nigeria.

The IMF said this during its regular news conference coordinated by the fund’s Director, Communication Department, Julie Kozack, at the IMF Headquarters in New York.

Kozack said the IMF welcomed the recent removal of fuel subsidies in Nigeria and the unification of the exchange rate regime.

She said strengthening revenue mobilisation through tax administration reforms was also essential to create fiscal space, reduce vulnerabilities, and put public debt on a sound footing.

Speaking on inflation in Nigeria, Kozack said it is expected to increase in the coming months.

“Therefore, as a result, fiscal and monetary policy tightening, including reducing Central Bank financing of government fiscal deficits are needed to prevent a further escalation of inflation.”

Speaking on the IMF’s interventions, she said the fund had been part of the global response to difficult transitions that countries had faced.

“For example, when thinking about the pandemic, we mounted an unprecedented response to help members deal with the pandemic and shocks after the pandemic, such as was created by Russia’s invasion of Ukraine.

“Since March 2020, we have approved over 300 billion dollars in financing for 96 countries, including concessional lending to 57 low-income countries: and we are still seeing very high demand for IMF financing.

“Since Russia invaded Ukraine, the IMF has approved 47 requests from 43 countries for new financing, totalling 137 billion dollars.

“We have also been changing and adapting as the world has been changing and adapting, and now we are facing a fresh set of transitions, globally.”

Kozack said the fund intended to continue to adapt and respond with agility and would require timely policy changes and stronger resources at the IMF.

Speaking on the IMF’s Managing Director’s blog which was released on Thursday ahead of the G20 meetings, Kozack said the fund was prioritising increasing the overall size of the IMF’s quarter resources.

“These resources are critical to have a robust global financial safety net, particularly for countries that rely on that global financial safety net, many of whom are low-income and vulnerable countries.

“This must be complemented by decisions to replenish the IMF’s concessional resources for vulnerable countries.

“Our fully funded Poverty Reduction and Growth Trust, and a replenished Catastrophe Containment and Relief Trust, that provides debt service relief when countries are hit by large shocks.”

She said the fund was also exploring reforms to the IMF’s lending toolkit, including adjustments to its precautionary instruments to better suit the needs of its membership.

“We are, of course, also looking at ways to better account for how climate change affects debt sustainability and to enhance our support for countries hit by climate shock.” (NAN)