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Tag: IMF

  • Global economic growth weaker than expected- IMF

    Global economic growth weaker than expected- IMF

    Global economic growth is likely to be weaker than earlier expected, the head of the International Monetary Fund IMF) said on Tuesday.

    IMF Managing Director Christine Lagarde told university students at the start of a two-day visit to Jakarta that low growth was due to slower recovery in advanced economies and a further slowdown in emerging nations.

    Lagarde also warned emerging economies like Indonesia to “be vigilant for spill-overs” from China’s slowdown, tighter global financial conditions and the prospects of a U.S. interest rate hike.

    “Overall, we expect global growth to remain moderate and likely weaker than we anticipated last July,” Lagarde told the university students.

    The IMF in July forecast global growth at 3.3 per cent this year, slightly below last year’s 3.4 per cent.

    Lagarde said China’s economy was slowing, although not sharply or unexpectedly as it adjusts to a new growth model.

    “The transition to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy.

    “That said, the authorities have the policy tools and financial buffers to manage this transition.”

    Lagarde, who is visiting Indonesia for the first time in three years, said Southeast Asia’s largest economy had the “right tools to actually react” to the global volatility.

    “You have very sound public finances with overall government debt in the range of twenty per cent relative to GDP, you have a relatively small deficit,” she said before meeting with Indonesian President Joko Widodo.

     

  • IMF envisages collapse in Nigeria’s oil revenue by $36bn

    IMF envisages collapse in Nigeria’s oil revenue by $36bn

    The International Monetary Fund (IMF) has presaged of some consequences in Nigeria’s economy following oil price shock.

    The IMF said the challenge might occur from sharp drop in oil revenue which it predicted would drop to $52 billion this year, from $88 billion it was last year.

    According to the Fund’s Article IV Consultation Staff Report, this represents a reduction of six percentage points in the nation’s Gross Domestic Product (GDP) and would reduce its external current account balance as well as international reserves.

    The report added that Nigeria’s outlook for growth is expected to moderate as the economy adjusts to permanently lower oil prices.

    The IMF, however, said the government has expressed its determination to implement appropriate measures to manage risks.

    “They agreed that the oil price shock is significant and, at least in part, permanent, but saw a smaller effect on economic activity, owing to measures targeted at sectors critical for growth (agriculture, power, small enterprises) and the impact of remittances.

    They noted that rising food self-sufficiency would limit the pass-through to inflation and activity in housing construction would continue,” it said.

    According to the IMF, fiscal oil revenues are projected at 3.4 per cent of GDP, down from 5.8 per cent last year, limiting fiscal spending. It said aggregate demand shocks could lower growth by about 1.5 percentage point from last year to 4.3 per cent this year.

    IMF added that the overall impact on non-oil sector GDP will come from cuts in public investment and a reduction in real purchasing power of oil receipts.

    It noted that, “The depreciation of the local currency will add to inflation, reflecting the pass-through of higher domestic prices for imports. However, the effect is likely to be contained, in part due to lower food prices from increased local production of staple food crops.”

    The IMF said the outlook is compromised by low fiscal and external buffers, which have reduced the capacity to absorb shocks relative to the experience of the 2008-09 financial crisis.

    IMF said although small, Nigeria’s exports to Economic Community of West African States (ECOWAS) countries have been increasing, from $1 billion in 1990 to about $6 billion in 2013.

    It said the implementation in January of the Common External Tariffs (CET) for ECOWAS member countries is expected to reduce incentives for informal trade and simplify customs procedures, potentially increasing recorded trade volumes.

    “Moreover, the slowdown in Nigeria will adversely affect informal exports to Nigeria. Anecdotal evidence indicates that goods that are subject to import restrictions in Nigeria have become key export goods for neighbouring countries.

    “Those informal exports to Nigeria are important sources of income for some neighbouring countries and outward spillovers may be non trivial,” it said.

    It noted that growing cross-border activity of Nigerian-based banks has increased the scope for spillovers through financial channels, along with regulatory and supervisory challenges.

  • Nigeria’s oil revenue may drop to $52b, says IMF

    Nigeria’s oil revenue may drop to $52b, says IMF

    The International Monetary Fund (IMF’s) Article IV Consultation Staff Report has shown that Nigeria’s oil earnings would drop to $52 billion this year, from $88 billion it was the previous year.

    This represents a reduction of six percentage points in the nation’s Gross Domestic Product (GDP) and would reduce its external current account balance as well as international reserves.

    The Fund’s report says Nigeria’s outlook for growth is expected to moderate as the economy adjusts to permanently lower oil prices.

    According to the IMF, fiscal oil revenues are projected at 3.4 per cent of GDP, down from 5.8 per cent last year, limiting fiscal spending. It said aggregate demand shocks could lower growth by about 1.5 percentage point from last year to 4.3 per cent this year.

    IMF added that the overall impact on non-oil sector GDP will come from cuts in public investment and a reduction in real purchasing power of oil receipts.

    It said the depreciation of the local currency will add to inflation, reflecting the pass-through of higher domestic prices for imports, However, it said the effect is likely to be contained, in part due to lower food prices from increased local production of staple food crops.

    The IMF said the outlook is compromised by low fiscal and external buffers, which have reduced the capacity to absorb shocks relative to the experience of the 2008-09 financial crisis.

    The lender however said the government has expressed its determination to implement appropriate measures to manage risks. “They agreed that the oil price shock is significant and, at least in part, permanent, but saw a smaller effect on economic activity, owing to measures targeted at sectors critical for growth (agriculture, power, small enterprises) and the impact of remittances. They noted that rising food self-sufficiency would limit the pass-through to inflation and activity in housing construction would continue,” it said.

    IMF said although small, Nigeria’s exports to Economic Community of West African States (ECOWAS) countries have been increasing, from $1 billion in 1990 to about $6 billion in 2013.

    It said the implementation in January of the Common External Tariffs (CET) for ECOWAS member countries is expected to reduce incentives for informal trade and simplify customs procedures, potentially increasing recorded trade volumes.

    “Moreover, the slowdown in Nigeria will adversely affect informal exports to Nigeria. Anecdotal evidence indicates that goods that are subject to import restrictions in Nigeria have become key export goods for neighboring countries. “Those informal exports to Nigeria are important sources of income for some neighboring countries and outward spillovers may be non trivial,” it said.

    It said growing cross-border activity of Nigerian-based banks has increased the scope for spill-overs through financial channels, along with regulatory and supervisory challenges.

  • World Bank, IMF to help improve tax system

    World Bank, IMF to help improve tax system

    The World Bank and the International Monetary Fund (IMF) have said they would establish an initiative to help developing countries strengthen their tax systems ahead of the Financing for Development conference scheduled in Ethiopia.

    According to a recent joint statement carried by their official websites, the two bodies vowed to deepen the dialogue with developing countries on international tax issues with an aim to help increase their weight.

    They bodies also said they wanted their voices to be heard in the international debate on tax rules and cooperation.

    The two international financial institutions also planned to develop diagnostic tools to help member countries evaluate and strengthen their tax policies.

    During the gathering scheduled for Monday to Thursday, Heads of State and multilateral institutions and representatives from private sector would discuss how to scale up financial strengths to meet the Sustainable Development Goals.

    Chinese Finance Minister, Lou Jiwei, is expected to represent President Xi Jinping at the event.

  • IMF plans risk-based approach on money laundering

    The International Monetary Fund (IMF) is planning a risk-based approach to Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) supervision in Nigeria, Acting Director, Nigeria Financial Intelligence Unit (NFIU), Francis Oka-Philips Usani, has said.

    At the workshop by the Chartered Institute of Bankers of Nigeria (CIBN) on AML/CFT regimes in Nigeria, he said the determination to tackle the menace has resulted in the development of similar procedures across all regulatory authorities as well as the financial intelligence unit that involves the Central Bank of Nigeria, the Securities and Exchange Commission (SEC), the National Insurance Commission and the NFIU.

    Usani, who spoke on the theme: “New international initiatives in combating money laundering”, said the Presidential Committee and the agencies are at the fore of the national risk assessment to provide a basis for further developing the overall AML/CFT regime and strategic framework.

    He said more than 20 African countries, including Nigeria, have ratified the United Nations Convention against corruption, Article 14,  which deals with money-laundering prevention.

    “The convention calls for all states to implement a regulatory and supervisory regime which minimises the possibility of money laundering through customer identification, reporting of suspicious transactions and record keeping,” he said.

    He explained that there is also a recommendation which requires that states establish methods to monitor the movement of cash and negotiable instruments across borders.

    “Like most of the other regional and global initiatives, the Convention calls all signatory states to criminalise the act of money laundering,” he said.

    The Financial Action Task Force (FATF) in October, 2013 removed Nigeria from the list of countries identified as jurisdictions with significant deficiencies in their Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regimes.

    This came on the heels of the 2012 and 2013 amendments of the MLPA, 2011 and the Terrorism (Prevention) Act, 2011. The global anti-money laundering body gave its countenance to Nigeria’s significant progress in improving its AML/CFT regime and noted that the country had established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF evaluators had identified previously.

  • Don’t depend on IMF, World Bank, Falana tells Buhari

    Don’t depend on IMF, World Bank, Falana tells Buhari

    •’CBN now Bureau de Change’

    Activist-lawyer Mr Femi Falana (SAN) has implored President Muhammadu  Buhari not to depend on the International Monetary Fund (IMF) and the World Bank for the nation’s economic revival.

    Falana also enjoined the President not to romance with the local captains of industry if he truly wants to grow the economy.

    He chided the Central Bank of Nigeria (CBN) for its failure to monitor the nation’s economic policy.

    The lawyer spoke yesterday in Lagos at the National Discourse organised by The Companion, a group of Muslim men in business and professions, at the main auditorium of the University of Lagos, Akoka.

    Falana urged the President to form a link with the Nigerian people, saying the people should be identified through organisations, farmers, workers and the rest, and settle down to run the country on that basis.

    “If you are going to depend on IMF and World Bank and these funny characters called captains of industry, we are not going to make any progress,” he warned.

    “I want the president to form an organic link with the Nigerian people, not with Tony Blairs of this world, not with profiteers and rent collectors who you guys in the media regard as captains of industry; which industry? … that have collapsed? All these guys depend on duty waivers of trillions of naira. If you give me N500 billion worth of duty waivers, why will I not be the richest man in Africa?” he wondered.

    Falana decried the CBN’s deviation from its primary roles as the chief regulatory of body of the nation’s economy.

    “Our Central Bank,” he said, “has become a centre for Bureau de Change; it only talks of manipulating dollars. That is what Central Bank does now. It has nothing to do with acting as regulator of the monetary policy of our country. Once you have that kind of situation, you cannot put blame on corruption; corruption itself is manifestation of economic mismanagement. You can’t secure the lives of our people under this arrangement; you cannot create employment under this arrangement; you can’t generate electricity under this arrangement; we have spent $25 billion in the last 16 years to generate darkness; it is a shame that we now have power generation less than 2000 megawatts.

    Speaking on the theme Setting Agenda for the new government, Falana said that for the president to successfully fight corruption, some blockages had to be made, without which it would be an effort in futility.

    He urged Muslims in government to follow the teachings of the Holy Qu’ran because “the situation we find ourselves would have been solved long time ago, but due to greediness and having no regards for our creator.

    “The level of corruption in the country should be put on the Christian and Muslim leaders who have no regards for what they are taught in the two holy books.”

    Falana added that, corruption breeds unemployment and insecurity in the country, adding that President Buhari should remember what he said about the scourge during his electioneering campaign that if corruption is not killed, it would kill Nigeria.

    The Guest Speaker, Prof Abubakar Momoh enjoined President Buhari to take a cue from the Republic of China’s economic policy devoid of IMF and World Bank input.

    He urged the president to toe the line of China on how they grow their economy from zero level to what it is today.

    Momoh said: “President Buhari should emulate China which adopted the policy of economic sovereignty, rather than accepting what the International Monetary Fund told him to do.

    “Without economic sovereignty, the president cannot guarantee regular power supply, employment, good road network and infrastructural development for the citizenry.”

    The Companion Amir (President), Alhaji Musibau Oyefeso urged the president to always send the right signals that he do not condone corruption either in the open or in secret

    The government, Oyefeso said, should also have the courage and the political will to punish crime irrespective of the status of whoever is involved.

    “The rule of law must be uniformly applied to all citizens and institutions. Our criminal laws must also be reformed constantly in line with modern-day realities in order to block loopholes in the existing laws,” he said.

     

  • IMF plans risk-based approach to tackle money laundering

    IMF plans risk-based approach to tackle money laundering

    The International Monetary Fund (IMF) is developing a risk-based approach to Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT)  supervision in Nigeria, Acting Director, Nigeria Financial Intelligence Unit (NFIU), Francis Oka-Philips Usani has said.

    Speaking during a workshop organised by the Chartered Institute of Bankers of Nigeria (CIBN) on AML/CFT regimes in Nigeria, he said the determination to tackle the menace has resulted in the development of similar procedures across all regulatory authorities as well as the financial intelligence unit. This, he said involves the Central Bank of Nigeria (CBN), the Securities and Exchange Commission, (SEC) the National Insurance Commission and the NFIU.

    Usani, who spoke on ‘New International Initiatives in Combating Money Laundering,’ said the Presidential Committee with these agencies is at the fore of the national risk assessment to provide a basis for further developing the overall AML/CFT regime and strategic framework.

    He said more than 20 African countries including Nigeria have ratified the United Nations Convention against corruption, article 14 of which deals with measures to prevent money-laundering. “The Convention calls for all states to implement a regulatory and supervisory regime which minimises the possibility of money laundering through customer identification, reporting of suspicious transactions and record keeping,” he said.

    He explained that there is also a recommendation which requires that states establish methods to monitor the movement of cash and negotiable instruments across borders. “Like most of the other regional and global initiatives, the Convention calls all signatory states to criminalise the act of money laundering,” he said.

    The Financial Action Task Force (FATF) in October, 2013 removed Nigeria from the list of countries identified as jurisdictions with significant deficiencies in their AML/CFT regimes.

    This came on the heels of the 2012 and 2013 amendments of the MLPA, 2011 and the Terrorism (Prevention) Act, 2011 respectively. The global anti-money laundering body gave its countenance to Nigeria’s significant progress in improving its AML/CFT regime and noted that the country had established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF evaluators had identified previously.

  • Embrace fiscal discipline, IMF urges African oil exporting countries

    Embrace fiscal discipline, IMF urges African oil exporting countries

    The Director, African Department of the International Monetary Fund (IMF), Ms. Antoinette Sayeh, has called for fiscal adjustments among African oil exporting countries  in view of the downturn in revenue and limited buffers.

    Ms. Sayeh, who addressed the Africa Region reporters at the ongoing Spring Meetings of the World Bank and the IMF at the weekend in Washington DC, United States (U.S.), said spending cuts should be directed to the extent possible, not only to non-priority recurrent expenditure, arguing that significant cuts in public investments are unavoidable. Where feasible, exchange rate flexibility will also be important, to preserve scarce external reserves, she added.

    Ms Sayeh said the drop in oil prices also provides a unique opportunity to advance politically difficult energy subsidy reforms across the region.

    She said: “From a more medium-term perspective, the current commodity price shock is also a powerful reminder of the need to make more rapid progress towards economic diversification and structural transformation to ensure strong and durable growth.

    “This will require striking the appropriate balance between scaling-up outlays on human capital and infrastructure development and avoiding an unsustainable public debt built-up.”

    Besides, she urged countries in the region seeking to raise funds through sovereign bonds to be wary of exchange rate volatility  – especially with the U.S. dollar, which has recently risen in value.

    On growth, she was very bullish, stressing that countries in the region will expand by 4.5 per cent and will “continue being one of the fastest growing regions in the world-in fact, second only to emerging and developing Asia.”

    Acknowledging that the region’s eight oil exporters including Nigeria, will be hard hit by the falling oil prices, Sayeh stressed the need for spending cuts, diversification of the economy,  exchange rate flexibility and structural transformation to ensure strong and durable growth.

    Oil prices have plunged by more than 50 per cent since June last year, curbing revenue and investment plans in Nigeria which relies on crude proceeds for about 75 per cent of government’s revenue.

    Foreign reserves, which the Central Bank of Nigeria (CBN) uses to defend the naira, have also slumped to $29.514 billion as at last Monday.

    Reacting to these developments, the Federal Government late last year announced a set of austerity measures, which  included cancellation of overseas training for civil servants and the introduction of luxury taxes for certain goods and aircraft, among other cost-cutting measures.

  • IMF cautions African nations on Eurobonds

    The International Monetary Fund (IMF) has warned African countries against rushing to issue Eurobonds, saying they may face exchange rate risks and problems in repaying their debts.

    African countries, which are finding it difficult getting foreign aid have been borrowing to fund roads, power stations and other infrastructure, provoking comments that this could raise their debts.

    IMF’s African Department Director Antoinette Sayeh, who spoke with Reuters, said: “It comes with some risks; whereas what it costs the countries to issue these bonds can often look lower than what they would pay on domestic borrowing. The real cost in the final analysis will also depend on the evolution of exchange rates in the course of the life of the bond issuance.”

    In 2007, Ghana became the first African beneficiary of debt relief to tap international capital markets, issuing a $750 million 10-year Eurobond. Since then, previously debt-burdened countries such as Senegal, Nigeria, Zambia and Rwanda have all joined.

    He said: “In the last two years, we’ve seen new issuers-Kenya issuing the largest amount of sovereign bond this year and Cote d’Ivoire (Ivory Coast), as well also having issued this year and then Rwanda last year.

    “In 2014 alone we’ve seen some $7 billion already in sovereign bond issues, which is a record high for the region.”

    Tanzania is in the process of securing credit rating and plans to issue a debut Eurobond worth up to $1 billion in fiscal year 2014/15. Ethiopia aims to make its first foray into the international bond markets by January, while Rwanda is planning another sovereign bond.

     

  • IMF backs Irish budget flexibility request from EU

    The IMF has backed Ireland’s calls for the European Commission to grant it some budget flexibility, saying the current fiscal rules do not reflect an Irish economic recovery “starting to fire on all cylinders”.

    After years of painful budget cuts to get its public finances under control, Ireland demanded more leeway this month for its budget spending next year, having seen the Commission show similar leniency to France and Italy.

    Ireland has slashed its budget deficit from 12.6 percent of gross domestic product in 2011 to an expected 2.7 percent this year. Now it wants to be allowed to increase spending in line with its GDP growth rate next year rather than a lower, calculated average.

    “In Ireland’s case, the current EU methodology understates cyclical swings in unemployment, with implications for estimates of output gaps and potential growth,” the International Monetary Fund said in a report on the Irish economy.

    “Staff, therefore, welcomes ongoing work by the Irish authorities to refine some aspects of the EC methodology.”

    Under the EU’s Stability and Growth Pact, euro zone countries must consolidate public finances until they reach balance or surplus.

    The rules say that a government whose budget deficit is smaller than 3 per cent of GDP, but not yet in balance, as Ireland’s is likely to be this year, cannot increase spending more than its medium-term potential GDP growth. This is meant to ensure a gradual strengthening of the underlying budget balance.

    However, the Commission calculates this using a 10-year average, which after the deep recession that preceded Ireland’s international bailout puts the reference growth rate for the period 2014-16 at 0.7 per cent, the IMF said.

    That compares to growth of 4.8 per cent last year – the fastest expansion in the European Union – and IMF estimates of 3.5 per cent growth this year and a further 3 per cent in 2016.

    “Refinements of the current EU methodology for estimating potential GDP for Ireland should therefore, be developed and assessed to enable the fiscal rules to better serve their purpose,” the IMF said.

    Ireland was able to cut income tax rates and increase spending for the first time in seven years this year and has pledged to do so again in October’s budget for 2016 ahead of parliamentary elections early next year.

    The IMF recommended a phased and steady adjustment towards a balanced budget over the next three years and said that there was some flexibility to further ease the burden on higher income workers.