The International Monetary Fund has said oil-dependent economies, including Nigeria, continue to fare less than countries reliant on other export sectors, a pattern in place since the drop of oil prices in 2014. The IMF stated this on Thursday in its policy paper on macroeconomic developments and prospects in low-income developing countries.
It said the paper was discussed by its executive directors on November 13, 2019. The LIDCs (low-income developing countries) are a group of 59 IMF member countries primarily defined by income per capita level below a certain threshold (set at $2,700 in 2016). “The LIDCs are expected to record average annual growth of some five per cent in 2018-2019, a reasonably robust performance against the backdrop of loss of momentum in the global economy,” the Washington-based fund said.
It noted that experiences varied markedly within the group, with countries in fragile situations typically recording weaker-than-average performance. “Looking ahead, growth is expected to pick up marginally in 2020 and beyond, although risks to the global economy threaten this outlook,” the IMF said. Nigeria’s economy grew by 2.28 per cent in real terms in the third quarter of this year, compared to 2.12 per cent in Q2 and 2.10 per cent in Q1, according to the National Bureau of Statistics.
According to the IMF, the rapid growth in public debt recorded between 2013 and 2017 slowed significantly in 2018-19, although the general trend was still an upward drift in debt burden. The fund said, “Debt levels in several countries (notably fuel exporters) fell sharply on fiscal tightening and recoveries of GDP and/or real exchange rates (which boosted Dollar-equivalent denominators). An important exception is Nigeria, where debt to GDP ratio continued to increase.
“The number of countries facing serious debt challenges, as assessed by bank-fund debt sustainability assessments, has risen only marginally since 2017, after increasing sharply in the preceding four years.” The IMF directors noted that public debt vulnerability remained a serious cause of concern in many LIDCs, with more than two-fifths of countries assessed to be at high risk of, or already in, debt distress.
They emphasised the importance of strengthening debt management capacity and improving data quality and transparency, to be supported by implementation of the joint bank-fund multi-pronged approach to tackle debt vulnerability. It said current account balances weakened in many countries during 2018-2019, although with different drivers.
“Among fuel exporters, current account deficits narrowed over the period, helped by recovery in export revenues — except in Nigeria, where recovery in import levels dominated a transitory increase in export revenues in 2018 on the back of higher oil prices,” the IMF added. It said fiscal balances improved in most commodity exporters during 2018-19, supported by a pick-up in revenues.
The fund said, “Among fuel exporters, the median deficit fell from 5.4 per cent in 2017 to a projected 2.3 per cent in 2019 (below the 3.2 per cent median in 2010–14), with tight financing constraints limiting expenditure growth. “Nigeria is an outlier in this context, with the fiscal position, though improving, still significantly weaker than in 2010-2014 (the era of high oil prices).”
It added, “While spending levels are projected to increase across commodity exporters as a group, the increases are concentrated in less than half of the 30 countries (such as Nigeria, Uzbekistan and Sudan), with spending levels falling in most of the other countries (Côte d’Ivoire, Republic of Congo and Mauritania).”