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  • IMF: banks’ profit not hurt by inflation, rate hike

    IMF: banks’ profit not hurt by inflation, rate hike

    International Monetary Fund (IMF) has said the banking systems and profitability are largely insulated from inflation and increase in interest rates in both advanced and emerging economies.

    In a report released at the weekend, titled: “Rising Rates May Trigger Financial Instability, Complicating Fight Against Inflation”, the Fund said that vulnerabilities at some banks could lead to tradeoffs between containing inflation and protecting financial stability.

    The IMF said findings on the relationship between inflation and bank profitability showed that most banks are largely insulated from shifts in inflation as the exposure of income and expenses tend to offset each other.

    It however, added that some banks have significant inflation exposures, which may lead to financial instability if concentrated losses lead to wider panics in the banking sector.

     “As several major central banks are reassessing their monetary policy frameworks in the aftermath of the post-pandemic inflation surge, a deeper understanding of the links between inflation and bank profitability can help design better monetary policy frameworks. Our findings imply that central banks may need to consider financial stability when setting their policy stance to combat inflation,” the IMF said.

     “Does inflation matter for bank profitability? This question has received surprisingly little attention. We answer it by combining balance sheet and income data for more than 6,600 banks in advanced and emerging economies with nearly three decades of IMF economic data,” it said.

    The IMF said most lenders appear largely hedged against inflation with both bank income and expenses rising with inflation to similar degrees.

    It said that income and expenses tied to borrowing and lending are exposed indirectly to inflation, because they primarily react to policy rates that fluctuate in response to inflation. In contrast, other income and expenses—revenues from non-traditional banking activities, services, salaries, and rent—are exposed directly to price changes.

    It explained that at the country level, the impact of inflation on bank income and expenses individually varies widely across banking systems.

    Read Also: Tinubu right to ignore IMF, World Bank, says Kalu

    “Shifts in inflation are reflected in income and expenses much more rapidly in some countries than in others. But, again, since both income and expenses rise with inflation to similar degrees in most countries, most banking systems appear largely hedged to inflation,” it said.

    The IMF said some banks are particularly susceptible to inflation due to different risk management and business models. Outliers in both advanced and emerging market and developing economies stand to see large losses when inflation and interest rates spike.

    “Strikingly, 3 percent of banks in advanced economies and 6 percent of banks in emerging economies are at least as exposed to elevated interest rates as Silicon Valley Bank at the onset of its failure.”

     Banks in emerging economies also appear more exposed to inflation directly, possibly due to more widespread price indexation,” it said.

    “Amid high inflation, tightening monetary policy, while necessary, could lead to meaningful losses for banks with large exposures. Customers and investors may then reassess risks across all banks, which could lead to panics and financial instability,” it added.

    It said strengthening prudential regulation and supervision, heightening required risk management at banks, improving transparency, and using granular risk assessments accounting for key factors our research highlights for a broad set of banks would all help to systematically contain inflation exposures.

    “Despite these improvements, if losses at individual banks leave room for wider contagion, central banks may need to balance raising rates to contain inflation against the potential for financial instability,” it said.

    Before the pandemic, investors worried about how persistently low inflation and interest rates would crimp bank profits. Paradoxically, they also worried about bank profitability when post-COVID reopening sent inflation and central bank interest rates soaring.

  • Tinubu right to ignore IMF, World Bank, says Kalu

    Tinubu right to ignore IMF, World Bank, says Kalu

    Senator Orji Uzor Kalu has said that President Bola Ahmed Tinubu is right not to have accepted the economic policy prescriptions of the World Bank and International Monetary Fund (IMF).

    Drawing insights on the over-hauled Port-Harcourt and Warri Refineries, including the stability of the exchange rate,  the former Abia Governor noted that Nigeria wouldn’t have recorded its current level of progress if the President had accepted the monetary and economic packages of both the IMF and WB.

    Kalu stated this on Monday while addressing a gathering of guests at the Arochukwu Local Government country home of Chief Sunday Ugwa, according to a statement by his media aide, Kenneth Udeh, in Abuja.

    He lectured the guests on Tinubu’s economic reforms such as the petrol subsidy removal, the liberalisation of the foreign exchange system, the deregulation of the country’s petroleum downstream sector, the Tax Reform Bills and other policies.

    According to Kalu, Nigeria’s economic problems stem from indigenous factors and such required homegrown macro-fiscal reforms which the President had already deployed to stimulate the economic growth and development which the Nation is beginning to witness.

    “President Tinubu removed subsidy which former President Olusegun Obasanjo refused to do and he merged the exchange rate. We need to redefine governance models in Africa and some third world countries.

    “We must not accept all the recommendations of the World Bank and IMF, most of them are wrong. We must use home grown policies to solve our economic problems, because the majority of our problems are caused by local issues.

    “The kind of decisions Tinubu has been taking are the ones no President in the history of this country dared implement, but we all know deep within ourselves that those decisions are inevitable if we truly want to prosper as a nation,” Kalu said.

    To buttress his position,  Senator Kalu drew reference to the downward trend in the prices of petrol describing it as a sign that the President’s reforms were beginning to yield results.

    Kalu posited that there’ll be reduction in prices of other goods and services;

    “I know times are hard but let us be optimistic. Can you remember how much the  price of fuel and diesel were months ago and compare it to what the price is today ?

    “All other Inflated prices will come down. I am telling you the truth. Today the Warri Refinery that has not worked for over 20 years has started working,” he said.

    Kalu further cited an instance of how the Asian Tigers (Korea, Taiwan, Singapore, and Hong Kong) ignored the IMF and World Bank economic packages but yet have continued to record progress in their economies.

    He further urged youths not to shy away from democratic process in order not to allow the election of charlatans into elective offices.

    “The Asian Tigers jettisoned the IMF and World Bank but today we can see how they have progressed. Politicians must work very hard to sustain democracy because democracy is good for everyone but we must participate in democracy.

    “I challenge young people to stand up for democracy,  if you don’t participate you’ll allow idiots to be elected then it will no longer be interesting,” he said.

    He reiterated his stance for a shift in Nigeria’s economic strategy via regional competition as a key driver for growth using China as an example.

    Kalu called for commitment of both the Government and the people, saying, “We cannot be successful and develop without putting in the work on both the side of the Government and the people,  as Nigeria is today.

    “We cannot develop unless we engage in competition. China is said not to value human rights but they have been growing annually at 10 per cent for the last 35 years,” he said.

    Kalu’s host, Chief Sunday Ugwu, expressed gratitude to the Senator for honouring his invite and acknowledged the lawmaker’s impact in community development.

    He said: “I ask God to bless you, what you have for our people is very good and remarkable.  The rousing welcome you received when you arrived here shows your level of acceptance and how loved you are.”

  • Boost property tax revenue with tech, IMF tells Lagos

    Boost property tax revenue with tech, IMF tells Lagos

    The International Monetary Fund (IMF) has advised Lagos State Government to boost its revenue base by using technology to efficiently tax property within the state.

    In a report titled: “How Property Taxes Can Help Low-Income Countries to Develop” , the Fund said the use of satellites, drones, and the right policies can help countries increase revenue by up to 10 times at the local level.

    In the report co-authored by Martin Grote, Mario Mansour, Jean-François Wen, the Fund said large cities such as Delhi and Lagos can show a way forward by taxing property more efficiently to play meaningful role in raising revenue at the local level, and investing more in their people.

    The IMF said recurrent taxes on immovable property could help local governments capture the wealth generated through construction-intensive urbanisation.

    However, IMF asked countries to consider the political challenges of such reforms, as recent events in several countries suggest that raising taxes can create social unrest.

    “More efficient real estate taxes have an advantage in this regard: by being locally collected and spent, they may be politically less challenging than increases in broad-base national taxes,” it said.

    Also, it said generating such revenue fairly is especially important given the difficulty in developing countries of taxing income and wealth, which can be highly mobile.

    “The appeal of property taxes is clear when we look at revenue raised in advanced economies: more than one per cent of Gross Domestic Product (GDP) on average in Organisation for Economic Co-operation and Development countries, and nearly three per cent in some advanced economies. By contrast, they raise only around 0.1 per cent of GDP in emerging Asia and Africa,” it said.

    The Fund said revenues from property taxes are much higher in advanced economies, adding that achieving such a large growth requires improving property-tax coverage and addressing the capacity challenges in valuing real estate as ways to reverse the current revenue underperformance.

    “New property identification technologies and simplified valuation methods have become widely available. With policy reforms and better technology, recurrent property tax revenues in developing countries should be at least 10 times higher than current levels,” it said.

    On local revenue and spending, the Fund explained that when well designed, property taxes become a reliable and progressive form of municipal financing.

    The IMF said such property taxes enhance the accountability of local governments, since proceeds can be used to fund better local public services, and taxes the increase in wealth of those who own real estate that has appreciated due to urbanisation and associated public-infrastructure development.

    According to the Fund, the tight link at the local level between revenue and spending shields property taxes from national politics and imposes higher accountability standards on local councils for the effective use of the resources.

    It added that national legislation should regulate how much property taxes can differ across a country, limiting divergences in the level of local public services funded by this source, adding that municipalities should limit exemptions to a narrow range of public organizations, and forgone revenues should be regularly reported.

    “The impact on “asset-rich but cash-poor” households such as pensioners can be softened by deferring taxes until the property is sold, at which point full payment is due,” it said.

    The Fund said it is best to take a gradual approach to property-tax reform, using modern technology to broaden the coverage of area-based taxes (expressed as a fixed rate per square meter).

    “The goal should be to transition to full value-based property taxes in coming years as countries gain experience in implementation and market price information is meticulously recorded for periodic property valuation. Modern mapping technology, such as satellite imagery and aerial photography by drones, can be used to fast-track the expansion and coverage of property taxes to all parcels that ought to be included in the fiscal register,” it said.

    “Indian officials in Delhi and the greater Bangalore metropolitan area have started using satellite imagery to map properties in a geographic information system. In Africa, several municipalities have made impressive strides. Lagos increased  tax collection fivefold to more than $1 billion in 2011 by broadening the base of its property tax, coupled with better enforcement”.

    Read Also: IMF projects reduction in Nigeria’s debt-to-GDP ratio

    The IMF said the increased precision of satellite images enables the accurate measuring of surface areas and the development of fiscal-register maps that depict buildings and their alterations.

    “This allows the fast roll-out of an area-based property tax until valuation capacity has advanced to migrate toward a market value-based property-tax system that can raise more revenue”.

    The IMF said: “Demand for capacity development from the IMF in this area indicates that many countries are seeing the benefits from this combination of the right policies and technology enablers. It makes property-tax reform effective and politically appealing, especially when its objectives are communicated properly to the public”.

    The IMF also said the world’s governments must raise an additional $3 trillion to achieve sustainable and inclusive economic growth goals this decade.

    It said the cost in emerging markets equals four per cent of gross domestic product—and 16 per cent for low-income countries.

    Previous IMF research showed that countries have ample potential to raise more domestic tax revenue if they need it—up to  five percentage points of Gross Domestic Product (GDP) over two decades.

  • IMF advocates social protection plan, backs FG’S economic reforms

    IMF advocates social protection plan, backs FG’S economic reforms

    • Wants subsidy savings spent on healthcare, education

    • Says no new loan request from Nigeria

    • FG Sets 23% GDP revenue target — Edun

    The International Monetary Fund (IMF) is in full support of the Federal Government’s  ongoing economic reforms but  says a social protection scheme for the vulnerable will make the restructuring even better.

    It is of the view that savings  from petrol subsidy removal could  be spent on healthcare and educational sectors  for maximum impact on the people.

    The Director, African Department at the IMF, Abebe Selassie, gave the advice yesterday   during the regional economic outlook for Sub-Saharan Africa press briefing on the sidelines of the  ongoing World Bank/IMF annual meetings in Washington DC., USA.

    The IMF director said this is not the time for spending compression, but rather spending more on these sectors with a view to sustaining growth and improving social outcomes.

    Selassie said governments would do better carrying out reforms that ensure the mobilisation of  resources for schemes with greatest impact on the people.

    Minister of Finance and Coordinating Minister for the Economy, Wale Edun, during a parley with investors also on the  sidelines of the World Bank/IMF annual meetings, threw more light on the economic reforms in Nigeria.

    He said it was only on October 2, 2024  that petrol subsidy was effectively removed through market-pricing practices.

    “It is now that we will assess the gains of the subsidy removal, which will be a huge dividend to the people,” Edun said.

    When asked if the federal  government has approached the IMF for funding since the reforms took effect, Selassie said  there has been no such  request from Nigeria.

    Read Also: FG cautions content creators against negative narratives

    He applauded the reforms- petrol subsidy removal and exchange rate unification, describing them as better choices.

    Selassie said: “They have made choices that we think, are within the direction of better use of public resources in a way that will unlock the incredible potential that the economy has.

    “The reforms will make the economy more dynamic to invest in and will facilitate growth. And we welcome those reforms, while also recognising, that it has entailed quite a lot of cost adjustment.

    “A better job can be done by rolling out social protection, particularly to the most vulnerable.”

    The IMF chief, however, said the reforms embarked upon  by Nigeria are deeply domestic and political choices for the country’s leadership. 

    He said the Sub-Saharan African countries are implementing difficult and much needed reforms to restore macroeconomic stability, and while overall imbalances have started to narrow, the picture is varied.

    “Policymakers face three main hurdles,” he said.

    “First, regional growth, at a projected 3.6 per cent in 2024, is generally subdued and uneven, although it is expected to recover modestly next year to 4.2 per cent.

    “Second, financing conditions continue to be tight.

    “Third, the complex interplay of poverty, scarce opportunities, and weak governance, compounded by a higher cost of living and short-term hardships linked to macroeconomic adjustment are fueling social frustration.”

    On IMF’s  intensified engagement in the region, he said the involvement is at one of the highest levels in recent history, with numerous ongoing programs and financial arrangements.

    His words: “Since 2020, the Fund has made available over $60 billion in financing for the region. However, declining official development assistance is challenging the effectiveness of our support.

    “Much work remains to be done to reinvigorate reforms and tap into the region’s tremendous potential.”

    Selassie added that within this environment, policymakers face a difficult balancing act in striving for macroeconomic stability while also working to address development needs and ensure that reforms are socially and politically acceptable.

    “Protecting the most vulnerable from the costs of adjustment and realizing reforms that create sufficient jobs will be critical to mobilize public support,” he stated.

    He said that inflation in Sub-Saharan Africa continues to decline, and budget deficits have begun to narrow, reverting to pre-crisis levels.

    He said that debt-to-Gross Domestic Product (GDP) ratios are also stabilising albeit at a high level, which are positive signs for the region’s economic health.

    However,  Selassie admitted  political and social challenges faced by government  in  implementing much needed reforms.

    “The cost-of-living crisis, particularly due to higher food prices, has been more acute in our region,” he said.

    “And this has intensified the strain on households who spend a larger share of household expenses on food. Governments are making fiscal adjustments by increasing revenue and compressing spending.

    “But elevated interest burdens continue to strain public finances and they add to the sense that government services are not improving or even deteriorating.”

    FG Sets 23% GDP revenue target

    The Federal Government, according to Edun, plans  to boost budget revenues with a target of reaching 23 percent of GDP, a move aimed at fostering sustained economic growth.

    He said government was resolute in revamping the national  economy through policies and initiatives designed to uplift millions of Nigerians.

     “Our optimism for Nigeria’s future reflects the President’s dedication to implementing impactful policies,” he said.

    On Nigeria’s fiscal performance, he said: “Where we began was nearly 100 percent of revenue going toward debt servicing. We have reduced this to about 60 percent, which, while still high, represents significant improvement.”

    He said  budget deficit has reduced  from 6.5 percent of GDP to approximately 4.4 percent.

    Government’s target is 4 percent by December.

    The Director-General of the Budget Office of the Federation, Mr. Tanimu Yakubu, provided additional insights into Nigeria’s revenue performance. He reported that government revenue reached N12.6 trillion by August 2024, against a pro-rata budget projection of N13.1 trillion, leaving a shortfall of N500 billion.

    “Our August target was N13.1 trillion, and actual performance was N12.6 trillion, resulting in a deficit of N500 billion. Missing our target by only 3.6 percent is still a positive indicator,” Yakubu stated.

  • IMF: how stakeholders can support govt’s tax reform

    IMF: how stakeholders can support govt’s tax reform

    By Collins Nweze, Washington DC

    International Monetary Fund (IMF) officials have suggested ways the Federal Government can gain Nigerians’ support for its tax policy and debt management. 

     The officials listed transparency, efficiency, trust in tax collection processes, and sustainable debt practices as the strategies.

    The officials are the Division Chief in the Fiscal Affairs Department of the IMF, Davide Furceri; the Director, of the Fiscal Affairs Department, Vitor Gaspar and his deputy, Era Dabla-Norris.

    They spoke during the Fiscal Monitor news conference at the ongoing World Bank/IMF Annual Meetings in Washington DC, United States(U.S.) yesterday. 

     Furceri advised Nigeria’s policymakers to ensure that tax collection was efficient and fair to all.

    He added that tax revenue should be channeled to areas of greatest impact, including healthcare, power,  agriculture, and other segments that support quality life for the population.

    According to him, spending wisely creates fiscal space and room for other types of expenditure without adding to debt pressures.

    “I think it’s important to note that policy-makers need to build the trust of taxpayers, by ensuring that resources being collected are well spent, thereby emphasising and strengthening governance,” he said.

     Furceri also said that  Nigeria faces a low revenue to Gross Domestic Product (GDP) ratio, which is about 10 percentage points.

     “Second, the country faces a rising ratio of the debt service obligation to revenue. With about 15 percent of that data, means that a large part of revenue in the country is used to just finance the debt, a practice that can be improved on by boosting revenue mobilisation for the country,” he said.

     This, according to him, can be achieved by broadening the tax base and  improving transparency in the transfer of resources from the government to those   most affected. 

     Director of the Fiscal Affairs Department Gaspa advised countries to avoid cuts in public investment, a practice which, according to him, can have severe effects on growth, good governance, and transparency.

     Gaspar said that for countries in debt distress,   timely and front-loaded action should be used for its(debt)  control or even restructuring.

    On  Sub-Saharan Africa practices, he said that building fiscal space was not only crucial to limit public debt risk but a key to enable the state to play its full role in development.

    Read Also: Nigeria seeks global support at 2024 World Bank, IMF meetings

     He urged that fiscal adjustment should be timely, decisive, well-designed, and effectively communicated.

     Gaspar’s deputy, Dabla-Norris, stated that technology has created opportunities for nations to make progress.

     She said: “There are three keys to good governance. And these are technology, transparency, and trust. Technology can be used to promote transparency. If you have technology and transparency, you should expect to gain trust. And if you have trust, you have the citizens behind the government. 

    ‘’People will be willing to pay taxes, not necessarily happily, but in a quasi-voluntary way.” How Fed Govt’s tax reform  can gain support, by IMF

    From Collins Nweze, Washington DC

    International Monetary Fund (IMF) officials have suggested ways the Federal Government can gain Nigerians’ support for its tax policy and debt management. 

     The officials listed transparency, efficiency, trust in tax collection processes, and sustainable debt practices as the strategies.

    The officials are the Division Chief in the Fiscal Affairs Department of the IMF, Davide Furceri; the Director, of the Fiscal Affairs Department, Vitor Gaspar and his deputy, Era Dabla-Norris.

    They spoke during the Fiscal Monitor news conference at the ongoing World Bank/IMF Annual Meetings in Washington DC, United States(U.S.) yesterday. 

     Furceri advised Nigeria’s policymakers to ensure that tax collection was efficient and fair to all.

    He added that tax revenue should be channeled to areas of greatest impact, including healthcare, power,  agriculture, and other segments that support quality life for the population.

    According to him, spending wisely creates fiscal space and room for other types of expenditure without adding to debt pressures.

    “I think it’s important to note that policy-makers need to build the trust of taxpayers, by ensuring that resources being collected are well spent, thereby emphasising and strengthening governance,” he said.

     Furceri also said that  Nigeria faces a low revenue to Gross Domestic Product (GDP) ratio, which is about 10 percentage points.

     “Second, the country faces a rising ratio of the debt service obligation to revenue. With about 15 percent of that data, means that a large part of revenue in the country is used to just finance the debt, a practice that can be improved on by boosting revenue mobilisation for the country,” he said.

     This, according to him, can be achieved by broadening the tax base and  improving transparency in the transfer of resources from the government to those   most affected. 

     Director of the Fiscal Affairs Department Gaspa advised countries to avoid cuts in public investment, a practice which, according to him, can have severe effects on growth, good governance, and transparency.

     Gaspar said that for countries in debt distress,   timely and front-loaded action should be used for its(debt)  control or even restructuring.

    On  Sub-Saharan Africa practices, he said that building fiscal space was not only crucial to limit public debt risk but a key to enable the state to play its full role in development.

     He urged that fiscal adjustment should be timely, decisive, well-designed, and effectively communicated.

     Gaspar’s deputy, Dabla-Norris, stated that technology has created opportunities for nations to make progress.

     She said: “There are three keys to good governance. And these are technology, transparency, and trust. Technology can be used to promote transparency. If you have technology and transparency, you should expect to gain trust. And if you have trust, you have the citizens behind the government. 

    ‘’People will be willing to pay taxes, not necessarily happily, but in a quasi-voluntary way.”

  • Nigeria seeks global support at 2024 World Bank, IMF meetings

    Nigeria seeks global support at 2024 World Bank, IMF meetings

    Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, has held key discussion with IMF Managing Director, Kristalina Georgieva at the IMF Annual Meetings in Washington DC

    A statement from the ministry said the meeting focused on Nigeria’s economic growth prospects, the critical need to enhance social protection systems, and reviewed the significant progress achieved under President Bola Ahmed Tinubu’s ambitious reform agenda. 

    Edun will advocate for global backing of Nigeria’s economic reforms at the 2024 Annual Meetings of the World Bank and the International Monetary Fund (IMF). 

    The high-profile meetings will be held in Washington, D.C. from October 21 to October 26, 2024, with key ministerial events taking place between October 22 and 25.

    Leading Nigeria’s delegation, Edun will be at the forefront of discussions on strengthening Nigeria’s economic resilience, particularly amid the nation’s ongoing structural reforms. 

    He is expected to make a case for increased international support to ensure the success of these domestic initiatives, emphasizing that access to adequate and affordable financing is critical to maximizing the benefits of the country’s economic adjustments.

    Read Also: IMF: inflation impact on families’ income will linger

    In addition to his focus on Nigeria, the Finance Minister will spearhead efforts by the African caucus, pushing for a unified strategy to bolster Africa’s resilience against the complex challenges that confront the continent. This includes calls for enhanced financial support and policy alignment from global partners.

    Edun is also scheduled to headline a flagship event, Women Transforming the World, hosted by World Bank President Ajay Banga. The event will spotlight the transformative role women play in global development, showcasing initiatives aimed at fostering gender equality and economic empowerment.

    On the sidelines of the meetings, the Central Bank of Nigeria (CBN) will hold a session titled Strengthening Ties with Nigerians Abroad: A Conversation with Yemi Cardoso, Governor, CBN. 

    This event is aimed at highlighting the CBN’s recent reforms and exploring ways in which the Nigerian diaspora can play a role, particularly in efforts to increase remittance inflows, which are vital to Nigeria’s foreign exchange reserves.

    The IMF will also feature a series of analytical discussions, including “The Clock is Ticking: Meeting Sub-Saharan Africa’s Urgent Job Creation Challenge” and “Harnessing Renewables in Sub-Saharan Africa: Barriers to Reforms and Economic Prospects.” 

    These sessions will provide critical insights into how African nations can tackle pressing economic and social challenges while charting paths to sustainable growth.

    The Nigerian delegation’s participation in these high-level discussions underscores the country’s commitment to securing global support for its ongoing economic reforms, which are seen as essential to fostering inclusive growth and long-term stability.

  • IMF: inflation impact on families’ income will linger

    IMF: inflation impact on families’ income will linger

    The International Monetary Fund (IMF) Managing Director, Kristalina Georgieva yesterday hinted that the impact of inflation in families income will linger despite steps taken by economies to tackle it.

    She provided insights on the ongoing  IMF/World Bank Annual Meetings holding in US, and conversations finance ministers and central bank governors will focus on this week.

    She said there was need to discuss inflation in terms of “where we are, where we are headed, and what to do about it “.

    She explained inflation rates may be falling in some economies, but the higher price level that we feel in our wallets is here to stay.

    “Families are hurting, people are angry. Advanced economies saw inflation rates at once-in-a-generation highs. So too did many emerging market economies. But look how bad the situation was for the low-income countries. At the country level and at the level of individuals, inflation always hits the poor the hardest,” she said.

    Read Also: Senator Ashiru to NDLEA: prosecute anyone caught with Illicit drugs in my house

    Georgieva, added that many countries are benefiting from central bank independence in advanced economies and many emerging markets adding that years of prudential reforms in banking, progress made in building fiscal institutions and capacity development worldwide.

    According to her, inflation has inflicted pain, especially on the poor due to larger increase in price level especially in low income countries of South Sudan, Nigeria, Yemen, Burundi and Pakistan.

    “Even worse, we are in a difficult geopolitical environment. We are all very worried about the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets. Its humanitarian impact, alongside the prolonged wars in Ukraine and elsewhere, is heartbreaking,” she said.

    And on top of it all, this is happening at a time when our forecasts point to an unforgiving combination of low growth and high debt—a difficult future.

    “Let’s take a closer look: medium-term growth is forecast to be lackluster—not sharply lower than pre-pandemic, but far from good enough. Not enough to eradicate world poverty. Nor to create the number of jobs we require. Nor to generate the tax revenues that governments need to service heavy debt loads while attending to vast investment needs, including the green transition,” she predicted.

    Georgieva said the picture is made more troubling by high and rising public debt—way higher than before the pandemic, even after the brief but significant fall in debt-to-GDP as inflation lifted nominal Gross Domestic Product (GDP).

    She asked countries to consider the share of government revenue consumed by interest payments.

    “This is where high debt, high interest rates, and low growth come together—because it is growth that generates the revenues governments need to function and invest. As debt increases, fiscal space contracts disproportionately more in low-income countries—not all debt burdens are made the same,” she said.

    To keep inflation figures low, she said governments must work to reduce debt and rebuild buffers for the next shock—which will surely come, and maybe sooner than we expect.

    She also advised that budgets need to be consolidated—credibly, yet gradually in most countries. This will involve difficult choices on how to raise revenues and make spending more efficient, while also making sure that policy actions are well-explained to earn the trust of the people.

    “Across a wide sample of countries, political discourse increasingly favors fiscal expansion. Even the traditionally fiscally conservative political parties are developing a taste for borrow-to-spend. Fiscal reforms are not easy, but they are necessary and they can enhance inclusion and opportunity. Countries have shown that it can be done,” she said.

    Georgieva said although there is abundance of mobilize capital globally,  but often not in the right places or right types of investments—just think of all the money from all corners of the globe poured into liquid but less-productive assets in a few major financial centers.

    “Putting savings to work for maximum economic benefit requires policymakers to focus on eliminating barriers such as weak investment environments and shallow capital markets. Financial sector oversight must not only ensure stability and resilience, but also encourage prudent risk-taking and value creation,” she said.

  • World Bank, IMF annual meeting to start in Washington

    World Bank, IMF annual meeting to start in Washington

    Overshadowed by international crises, the International Monetary Fund (IMF) and the World Bank annual meeting is due to start on Monday in the U.S. capital, Washington.

    The meeting is to bring together finance ministers, representatives from the financial sector and development cooperation, as well as central bankers.

    The discussions, set to run until Sunday, are expected to address, among other issues, a looming debt crisis in lower-income countries, climate change and poverty alleviation.

    Read Also: IMF chief hails China’s commitment to climate goals

    As part of the meeting, the IMF also plans on Tuesday to present a new forecast for future growth in the global economy.

    IMF head, Kristalina Georgieva, said last week that the outlook for the world economy in the medium term was lackluster,  not sharply lower than pre-pandemic, but far from good enough.

    Participants from Germany included Finance Minister Christian Lindner and Bundesbank President Joachim Nagel.

    (dpa/NAN)

  • IMF cuts borrowing cost for countries by 36%

    IMF cuts borrowing cost for countries by 36%

    The Executive Board of the International Monetary Fund (IMF) yesterday announced a Review of Charges and the Surcharge Policy that allows it lend to countries at a lower rate.

    In a statement, Managing Director of the IMF, Kristalina Georgieva, said the global economy is challenging for many countries, and the Fund has to slash its lending rates by 36 per cent or $1.2 billion annually equivalent to support them.

     “In a challenging global environment and at a time of high interest rates, our membership has reached consensus on a comprehensive package that substantially reduces the cost of borrowing, while safeguarding the IMF’s financial capacity to support countries in need.”

    “The approved measures will lower IMF borrowing costs for members by 36 per cent or about $1.2 billion annually. The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.”

    Read Also: IMF positive on capital flow to emerging markets

    “This is achieved by reducing the margin over the SDR interest rate, raising the threshold for level-based surcharges, lowering the rate for time-based surcharges, and increasing the thresholds for commitment fees. The approved package will take effect on November 1, 2024.”

    “While substantially lowered, charges and surcharges remain an essential part of the IMF’s cooperative lending and risk management framework, where all members contribute and all can benefit from support when needed. Together, charges and surcharges cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent borrowing”.

    “This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most,” she said.

  • IMF lowers borrowing costs by 36%

    IMF lowers borrowing costs by 36%

    The Executive Board of the International Monetary Fund (IMF) has approved to lower the IMF’s borrowing costs for members by 36 per cent, or about 1.2 billion dollars annually.

    A statement, issued by the IMF Press Centre, said this was the outcome of the fund’s Board Review of Charges and the Surcharge Policy on Friday.

    It said following the outcome of the meeting, Ms Kristalina Georgieva, Managing Director of the IMF, issued the following statement.

    “In a challenging global environment and at a time of high interest rates, our membership has reached consensus on a comprehensive package.

    “This package substantially reduces the cost of borrowing, while safeguarding the IMF’s financial capacity to support countries in need.

    “The approved measures will lower IMF borrowing costs for members by 36 per cent, or about 1.2 billion dollars annually.

    “The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.

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    “This is achieved by reducing the margin over the Special Drawing Rights (SDR) interest rate, raising the threshold for level-based surcharges, lowering the rate for time-based surcharges, and increasing the thresholds for commitment fees.”

    Georgieva said the approved package would take effect on Nov. 1, 2024.

    “While substantially lowered, charges and surcharges remain an essential part of the IMF’s cooperative lending and risk management framework, where all members contribute and all can benefit from support when needed.

    “ Together, charges and surcharges cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent borrowing.

    “This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.”

    The IMF boss said the reforms would help ensure that the IMF would continue serving its members in a changing world.

    The statement said charges and surcharges did not apply to borrowing from the IMF’s Poverty Reduction and Growth Trust, under which low-income members receive financial support on concessional terms.(NAN)