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  • Nigeria and the IMF, World Bank pills

    Nigeria and the IMF, World Bank pills

    SIR: The call on the federal government by one of the nation’s foremost lawyers and human rights activists, Femi Falana (SAN) to turn its back on the policies inspired by the World Bank and the International Monetary Fund (IMF) could not have come at a better time.

    The federal government does not ordinarily need its citizens to make such calls before realizing it is expedient. Senator Adams Oshiomhole, former national chairman of the All Progressive Congress (APC) had during the screening of Olayemi Cardoso as governor of the Central Bank of Nigeria (CBN) cautioned him not to follow the dictates of the IMF and the World Bank because that move would sound a death kneel for the economy.

    It is a known fact that the deceptive economic policies sold to Venezuela by the IMF and the so-called World Bank eventually destroyed that country’s oil-rich economy. With over 10 flourishing refineries, today Venezuela is gasping for breath. Its economy has been wrecked beyond recognition; while the architects of the destruction are busy offering them palliatives.

    Most countries around the world subsidize one thing or the other to make life meaningful for their citizens. However, the IMF has continued to goad the leadership in Nigeria to introduce more austerity measures for the masses through the increase in electricity tariff.

    Only two months ago, the IMF also called on the government to remove what is left of subsidies on other petroleum products and increase the pump price of petroleum to above N750. It took the uproar from Nigerians for the government to perish the thought. It subsequently came out to reassure Nigerians that there was no plan to increase the prices of fuel.

    Read Also: Reject IMF pressure to remove fuel, electricity subsidy – Falana

    Today, with the new policy of floating the naira, also backed by the IMF, the naira has nose-dived and no one knows when the fall would be halted. Therefore, one pertinent question begging for an answer is: must the nation’s economic team be led on the nose all the time by agencies whose interest is to serve the wishes of the imperialist countries to the detriment of the developing nations?

    Whether accepted or not, no country has succeeded in surrendering the development of its economy to the dictates of the IMF and World Bank without paying a huge price.

    It is therefore time for the economic team of President Bola Tinubu to reassess the situation and examine if the current economic policies which are the delight of the IMF and World Bank are in the interest of the people of Nigeria or not.

    One short route to bringing an end to the woes of the naira is for the economic team to renegotiate the currency swap deal with China. It is only when most of the nation’s foreign transactions are no longer done with the American dollar that the nation can begin to breathe again.

    • Ifeonu Okolo, Asaba, Delta State.
  • IMF asks CBN to settle $2.2b backlog to rebuild trust

    IMF asks CBN to settle $2.2b backlog to rebuild trust

    • Lauds Tinubu’s reforms, move to tame inflation

    The International Monetary Fund (IMF) has advised the Central Bank of Nigeria (CBN) to settle overdue foreign exchange (forex) backlogs to rebuild confidence in the central bank and the naira.

    The Fund made this known in its Executive Board Post-Financing Assessment with Nigeria report released at the weekend.

     It insisted that settling the CBN’s overdue dollar obligations wouldhelp rebuild confidence in the  apex bank and the naira. “Sharing comprehensive information on Nigeria’s reserves position would facilitate a more complete assessment of the external situation,” it said.

    The IMF  said if the authorities succeed in developing and implementing a comprehensive reform agenda, the medium-term outlook would be much improved.

    The Fund said: “Headline inflation reached 27 per cent year-on-year in October (food inflation 32 percent), reflecting fuel subsidy removal, exchange rate depreciation, and poor agricultural production. While the current account registered a surplus in the first half of 2023, the 30-day average of gross international reserves (GIR) reported by the CBN declined to $33 billion in October, covering six months of imports,” it said.

    According to the IMF, President Bola Tinubu has moved ahead with important structural reforms: removing fuel subsidies and unifying the various official foreign exchange windows.

    It said the new administration has made a strong start, tackling deep-rooted structural issues in challenging circumstances.

    “Immediately, it adopted two policy reforms that its predecessors had shied away from fuel subsidy removal and the unification of the official exchange rates. Since then, the new CBN team has made price stability its core mandate and demonstrated this resolve by dropping its previous role in development finance. On the fiscal side, the authorities are developing an ambitious domestic revenue mobilisation agenda,” it said.

    It said President Tinubu appointed a Presidential Fiscal Policy and Tax Reforms Committee to make proposals for raising domestic revenue to support investments in infrastructure, health, and education.

    “To ease the impact of rapidly rising inflation on living conditions, the government has released cereals from the grain reserve, provided subsidised fertiliser to farmers, capped retail fuel and electricity prices—thus partially reversing the fuel subsidy removal—implemented a civil service wage award, and suspended the Value AT on diesel,” the IMF stated.

    The Fund explained that the government’s focus on revenue mobilisation and digitalisation would improve public service delivery and safeguard fiscal sustainability.

    “The envisaged reduction in the overall deficit in 2024 would help contain debt vulnerabilities and eliminate the need for CBN financing. Temporary and targeted support to the most vulnerable in the form of social transfers is needed, given the ongoing cost-of-living crisis. Fuel and electricity subsidies are costly, do not reach those that most need government support and should be phased out completely,” it said.

    International Monetary Fund  assesses that Nigeria’s capacity to repay the Fund is adequate under the baseline adding that the authorities’ policy intentions are well placed to address risks of a downside scenario where difficult trade-offs may arise between urgent humanitarian needs and debt service, including to the Fund.

    Read Also: IMF projects global growth forecast to 3.1%

    In such circumstances aggressive monetary tightening and fiscal adjustment combined with support from development partners would be needed to restore macroeconomic stability.

    Concluding, the Fund said like many other countries, Nigeria faces a difficult external environment and wide-ranging domestic challenges.

    “External financing (market and official) is scarce, and global food prices have surged, reflecting the repercussions of conflict and geo-economic fragmentation. Per-capita growth in Nigeria has stalled, poverty and food insecurity are high, exacerbating the cost-of-living crisis,” it said.

    Also, the country faces low reserves and very limited fiscal space constrain the authorities’ option space, but against this backdrop, the authorities’ focus on restoring macroeconomic stability and creating conditions for sustained, high and inclusive growth is appropriate.

    “The CBN has set out on a welcome path of monetary tightening. The Governor has committed to making price stability the core objective of monetary policy, and the CBN has taken actions to mop up excess liquidity. Continuing to raise the monetary policy rate until it is positive in real terms would be an important signal of the direction of monetary policy.

    “The authorities are exploring options to strengthen Nigeria’s reserve position, though an assessment of unintended consequences is needed in some cases,” the fund said.

  • IMF projects global growth forecast to 3.1%

    IMF projects global growth forecast to 3.1%

    The International Monetary Fund (IMF) has raised its forecast for global growth, projecting 3.1 per cent this year. Europe’s prospects, however, are not as promising.

    The global growth forecast was raised by 0.2 per cent from an earlier estimate in its latest World Economic Outlook report released yesterday.

    It hinged the development “on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China.”

    In the report, the IMF indicated that the Global GDP is expected to accelerate slightly in 2025, by 3.2 per cent.

    The IMF’s chief economist, Pierre-Olivier Gourinchas, said the global lender’s updated World Economic Outlook showed that a “soft landing” was visible with inflation declining steadily and growth holding up, but overall growth and global trade remained lower than the historical average.

    “The global economy has been surprisingly resilient, with growth now projected at 3.1 per cent in 2024 and 3.2 per cent in 2025. For 2024, the slight upgrade from our October projections is largely due to resilience in the United States and several large emerging markets and developing economies, coupled with more fiscal support in China. However, this forecast remains well below the 2000-2019 average growth of 3.8 per cent.

    Read Also: IMF asks low income countries to refinance $60b debts

    “Inflation is falling faster than anticipated in most regions, thanks to the easing of supply-side pressures and restrictive monetary policy. The global headline inflation rate is expected to decrease to 5.8 percent in 2024 and 4.4 percent in 2025, with the forecast for 2025 revised down. The likelihood of a hard economic landing has decreased due to faster disinflation and steady growth, said Gourinchas.”

    He noted that the likelihood of a hard landing has decreased due to disinflation and steady growth, and the risks to global growth are largely balanced.

    “Risks to global growth are now broadly balanced. On the upside, faster disinflation could ease financial conditions. A looser fiscal policy than expected could imply a temporarily higher growth, though, at the risk of a more costly adjustment later on, stronger reform momentum could boost productivity growth with positive spillovers. However, downside risks remain, including potential new commodity price spikes from geopolitical shocks. Persistent underlying inflation, continued weaknesses in China’s property sector, or a disruptive turn to tax hikes and spending cuts,” Gourinchas added.

    The latest World Economic Outlook report recommends that beyond fiscal consolidation, the focus should return to medium-term growth.

    The IMF indicated that a faster pace is needed to address the world’s many structural challenges: the climate transition, sustainable development, and raising living standards.

  • IMF asks low income countries to refinance $60b debts

    IMF asks low income countries to refinance $60b debts

    The International Monetary Fund (IMF) has asked low income countries with significant debt repayments falling due in the next two years to refinance about $60 billion of external debts yearly.

    In a report, IMF said with many competing demands for financing, including from advanced and emerging market economies that are also trying to adapt to climate change, there’s a significant risk of a liquidity crunch—failure to raise sufficient financing at an affordable cost. That could, in turn, lead to a destabilising debt crisis.

    The fund said as 2024 starts, the good news is that there haven’t been any notable requests by a low-income country for comprehensive debt relief since Ghana’s, more than a year ago. Despite this, vulnerabilities remain, with high debt servicing costs a growing challenge for low-income countries.

    “Financing pressures due to relatively high interest payments and the pace at which low-income countries need to repay debt are straining budgets. That prevents these countries from spending more on essential services or the critical investment needed to attract business, create jobs, improve prosperity, and build climate resilience,” it said.

    One important metric is the share of revenues the government collects from its population through taxes and other fees that goes to pay its foreign creditors. While the scale of the burden differs greatly across countries, it’s generally about two and a half times higher than a decade earlier.

    Read Also: CBN, FAAN relocation: Southern Elders berate northern senators

    This means for a typical low-income borrower, the share has risen to about 14 per cent, from about six per cent, and as much as 25 percent, from about nine per cent in some economies. This is one of the key indicators used in the framework for assessing debt sustainability that signals a country might be at risk of needing financial support from the IMF or of missing a debt payment.

    It explained that one factor was higher government borrowing and deficits to mitigate the impact of the pandemic and other external economic shocks.This has increased the level of debt and consequently the cost of servicing it. It’s encouraging that this trend is reversing as countries bring primary deficits back in line with pre-pandemic levels.

    “In addition, central banks have significantly raised borrowing costs to tame inflation. That makes it costlier for governments to raise new debt or refinance existing debt. While central banks may be done raising rates, it is not clear when they will start to cut, and this uncertainty may be reflected in volatile financial market conditions,” it said.

    “Low-income countries have also increasingly borrowed from the private sector—with about one third of financing coming from private creditors in the last decade compared with about one fifth in the previous decade. This reflected a slowdown in financing from multilateral development banks (MDBs) in the earlier part of the decade and through official development assistance (ODA) agencies over 2020-22 compared to borrowing needs. This shift has increased both financing costs and vulnerability to global financial shocks,” it said.

  • Ghana secures additional $600m IMF facility

    Ghana secures additional $600m IMF facility

    The International Monetary Fund (IMF) has completed the 2023 Article IV consultation and the first review of Ghana’s 36-month extended credit facility arrangement, with the approval of the first review paving the way for immediate disbursement of SDR 451.4 million, about $600 million.

    The IMF stated that Ghana’s performance under the programme has been strong noting that all quantitative performance criteria for the first review and almost all indicative targets and structural benchmarks were met.

    “The authorities’ reforms are bearing fruit, and signs of economic stabilisation are emerging. Growth in 2023 has proven resilient, inflation has declined, and the fiscal and external positions have improved. Progress is also being made on debt restructuring, with the domestic debt exchange completed over the summer and an agreement recently reached on the restructuring of official bilateral debt,” IMF stated on Ghana’s economic reforms.

    This was the first review of the $3 billion, 36-month Extended Credit Facility (ECF) Arrangement, which was approved by the board of IMF on May, 17, 2023, as well as the 2023 Article IV Consultation with Ghana.

    The additional disbursement of SDR 451.4 million or $600 million brought Ghana’s total disbursements under the arrangement to about $1.2 billion.

    According to IMF, Ghana is on track to lower the fiscal primary deficit on a commitment basis by about four percentage points of GDP in 2023.

    “Spending has remained within programme limits. To help mitigate the impact of the crisis on the most vulnerable population, the authorities have significantly expanded social protection programmes. On the revenue side, Ghana has met its non-oil revenue mobilisation target.

    “The Ghanaian authorities are also making good progress on their debt restructuring strategy. Their domestic debt restructuring was completed over the summer. On January 12, 2024, the authorities reached an agreement with the Official Creditor Committee (OCC) under the G20’s Common Framework on a debt treatment that is in line with Fund programme parameters. This agreement provided the financing assurances necessary for the Executive Board review to be completed.

    “Ambitious structural fiscal reforms are bolstering domestic revenues, improving spending efficiency, strengthening public financial and debt management, preserving financial sector stability, enhancing governance and transparency, and helping create an environment more conducive to private sector investment.

    “The authorities’ reform efforts are bearing fruit, and signs of economic stabilization are emerging. Growth in 2023 has proven resilient, inflation has declined, and the fiscal and external positions have improved.

    “Looking ahead, fully and durably restoring macroeconomic stability and debt sustainability and fostering a sustainable increase in economic growth and poverty reduction will require steadfast policy and reform implementation,” IMF stated.

    Read Also: Why IMF, World Bank policies can’t move 200m Nigerians out of poverty – Don

    Managing Director and Acting Chair, International Monetary Fund (IMF), Mr. Bo Li, said fully and durably restoring macroeconomic stability and debt sustainability and fostering higher and more inclusive growth require steadfast policy and reform implementation.

    Li said Ghana’s plans to further reduce deficits by mobilising additional domestic revenue and streamlining expenditure and to finalise its comprehensive debt restructuring are critical to underpin debt sustainability and ease financing constraints.

    “Continued efforts to protect the vulnerable and to create space for higher social and development spending are also key. Reforms to improve tax administration, strengthen expenditure control and management of arrears, enhance fiscal rules and institutions, and improve SOEs management are needed to ensure lasting adjustment.

    “The authorities took decisive steps to rein in inflation and rebuild foreign reserve buffers. Maintaining an appropriately tight monetary stance and enhancing exchange rate flexibility are key to achieving the program’s objectives.

    “Bank of Ghana had deployed its regulatory and supervisory tools to mitigate the impact of the domestic debt restructuring on financial institutions. The authorities’ strategy aimed at maintaining a sound financial sector, drawing on new resources from the private sector, government, and multilaterals to rapidly rebuild financial buffers, is welcome. Ensuring full implementation of bank recapitalization plans and addressing legacy issues in the financial sector will be important.

    “Reforms to create an environment more conducive to private investment are needed to enhance the economy’s potential and underpin sustainable job creation. Given Ghana’s exposure to climate shocks, promoting a green recovery by further advancing the adaptation and mitigation agendas should also remain a priority,” Li stated.

  • Why IMF, World Bank policies can’t move 200m Nigerians out of poverty – Don

    Why IMF, World Bank policies can’t move 200m Nigerians out of poverty – Don

    The Chairman Board of Trustees (BOT) of the Centre for Transparency Advocacy, Dr. Chima. Amadi yesterday said economic remedies emanating from  the International Monetary Fund (IMF) and the World Bank were incapable of  reviving the  Nigerian economy.

     He also said the policies of the two international financial institutions lacked the requirements   to move 200m Nigerians out of poverty.

    He asked the nation to look beyond ideas being recommended by developed countries.

    He said developing countries should have the autonomy to choose policies that best suit their conditions.

    Amadi, who made the submissions at the 4th National Colloquium in Sokoto, described  the nation’s high inflation rate as indefensible.

     He said: “Compared with other African and Asian countries, especially Indonesia, which is comparable to Nigeria in most respects, economic development in Nigeria has been disappointing.

    “With GDP of about $45 billion in 2001 and per capita income of about $300 a year, Nigeria has become one of the poorest countries in the world. As of 2000, it had earned about $300 billion from oil exports since the mid-1970s, but its per capita income was 20 percent lower than in 1975.

     “Meanwhile, the country has become so heavily indebted – external and domestic debt amount to about 70 percent of GDP— that it has serious difficulty servicing debt. Regional and sectoral unevenness in growth performance is high.

    “From the foregoing, it is simply clear that to raise 200 million Nigerians out of poverty as this current administration has resolved to do within the next decade, it would take more than just making it a campaign mantra but a radical departure from economic orthodoxy of the Global North evinced in the Washington Consensus model.”

    Amadi, who is a Doctoral Fellow at the University of Warwick in the UK, said economic growth strategies recommended by developed countries for developing nations are unworkable.

    He said the developed countries have been promoting  strategies which they have never practised.

    He added:” Historical Context of Development shows that many of today’s developed countries, such as the United Kingdom and the United States, achieved economic growth through strategies like tariffs, subsidies, and regulations to protect their nascent industries.” This historical perspective contrasts sharply with the free-market, liberalization policies they now promote for developing countries.

    ” The neoliberal policies advocated by institutions like the World Bank and the International Monetary Fund (IMF) – such as rapid liberalization of trade and investment, privatization, and deregulation – are not consistent with the historical experiences of successful development.

     “In fact, these policies might even hinder the growth of developing nations by exposing them prematurely to global competition.”

    He said the Federal Government should adopt subsidies and other forms of intervention to save the economy.

     Amadi added: “The state must play a significant role in guiding economic development, similar to the way it was utilized by now-developed countries during their own developmental stages.

    “This includes the use of tariffs, subsidies, and other forms of government intervention to support budding industries. Shall we forget hastily how former president Donald Trump used tariffs to effectively protect the American economy from the onslaught of the Chinese trade practices.

     “Developing countries should have the autonomy to choose policies that best suit their unique economic conditions and developmental stages. This contrasts with the one-size-fits-all approach often prescribed by international economic organizations.”

    “By providing this historical and critical analysis, I dare Nigeria’s leaders and economic policymakers to not be afraid to challenge conventional economic wisdom and call for a more nuanced and historically informed approach to economic development policy, especially for developing countries.

     ” There is now an urgent need for policy diversity and experimentation, making it incumbent on policymakers to acknowledge that strategies successful in one country may not be universally applicable.

     On the nation’s high inflation rate, Amadi blamed it on over-reliance on oil revenues by government.

    “Inflation in Nigeria has been a complex and challenging issue throughout its history. The nation’s heavy reliance on oil revenues, inadequate diversification of the economy, policy mismanagement, and global economic dynamics have all played significant roles in shaping inflation trends.

    “Before Nigeria gained independence in 1960, the country’s inflation rate was relatively low, primarily due to its agrarian economy and limited industrialization.

    Read Also: IMF executive board approves 50% quota increase

    ” The 1970s marked a period of rapid economic growth fueled by oil exports, which led to a significant increase in government revenue. However, this period also witnessed rising inflationary pressures as the influx of petrodollars and increased government spending drove consumer demand and importation.

    ” The 1970s oil boom brought immense wealth to Nigeria, but it also led to 

    economic imbalances. The nation became heavily reliant on oil exports, leading to a neglect of other sectors and creating vulnerabilities to oil price fluctuations.

    ” In the late 1970s and early 1980s, Nigeria experienced double-digit inflation, soaring to a peak of over 23% in 1984. The government’s mismanagement of fiscal policies and its inability to diversify the economy contributed to this inflation surge.”

  • IMF executive board approves 50% quota increase

    IMF executive board approves 50% quota increase

    The International Monetary Fund (IMF) Executive Board has approved a proposal to increase the quota of its members by 50 per cent.

    A statement from the IMF said the proposal will be presented to the Board of Governors for final approval.

    The quota increase is the 16th General Review of Quotas of the IMF. It follows the guidance from the International Monetary and Financial Committee (IMFC) at the 2023 Annual Meetings held in Marrakech, Morocco.

    The quota increase is designed to safeguard global financial stability by enhancing the IMF’s permanent resources and reducing reliance on borrowed resources. It will also strengthen the quota-based nature of the Fund and ensure the primary role of quotas in Fund resources.

    Once quota increases are in effect, borrowed resources comprising the Bilateral Borrowing Agreements and New Arrangements to Borrow (NAB) would be reduced to maintain the Fund’s current lending capacity.

    Read Also: IMF predicts African economies’ rebound by 2024

    The membership has also tasked the Executive Board to work to develop, by June 2025, possible approaches as a guide for further quota realignment, including through a new quota formula, under the 17th General Review of Quotas.

    IMF Managing Director Kristalina Georgieva said the proposed quota increase comes at a complex time for the global economy and the IMF’s membership. She expressed hope that the proposal will garner the broadest possible support from the membership, and that progress will be made on a quota realignment under the 17th Review.

    The Executive Board has requested that the Board of Governors vote on the proposal by December 15, 2023.

  • IMF predicts African economies’ rebound by 2024

    IMF predicts African economies’ rebound by 2024

    African economies will recover and record significant growth in 2024 despite several countries experiencing increased political instability and deteriorating security, Managing Director , International Monetary Fund (IMF), Kristalina Georgieva, has said.

    Speaking at the African caucus meeting held yesterday in US, she said: “We had very productive discussions on Africa’s economic prospects. This year has been a difficult year for Africa. The region is still emerging from the COVID-19 pandemic and African countries have been hit by high borrowing costs and a cost-of-living crisis.”

    Georgieva explained that against this backdrop, the IMF agreed that policy priorities to address these challenges should aim at solidifying the ongoing economic recovery, rebuilding buffers, and investing in the future to improve living standards. In countries with elevated and rising inflation, policy settings should be sufficiently tight to bring it down.

    She said that the exchange rate, where appropriate, should be allowed to play its shock absorber role while mitigating second-round effects of depreciation.

    Read Also: IMF optimistic about Africa’s economic growth next year

    “Fiscal policy should continue consolidating public finances and reducing debt sustainability risks while providing targeted social assistance to the most vulnerable. In resource intensive countries, investing in education, managing better resource-based wealth, accelerating diversification will help improve living standards,” she said.

    The IMF also  underscored the need to scale up concessional financing, including to support climate change adaptation and mitigation.

    “Large financing needs from infrastructure and social protection gaps are being exacerbated by climate change. While the African continent had a minor contribution to the stocks of greenhouse gases in the atmosphere, it is already bearing and is deemed to bear the largest costs from climate change. At the same time, fiscal space remains constrained as buffers have been depleted during the crisis. Private sector participation will also be essential to fill the funding gaps,” she said.

  • IMF optimistic about Africa’s economic growth next year

    IMF optimistic about Africa’s economic growth next year

    African economies will recover and grow significantly next year despite political instability and deteriorating security, the International Monetary Fund (IMF) has said.

    It noted that the continent was slowed down last year by COVID-19, high-interest rates and cost-of-living.

    Managing Director of the IMF  Kristalina Georgieva said spoke at the African caucus meeting in the United States (US) yesterday.

    “We had very productive discussions on Africa’s economic prospects. This year has been a difficult year for Africa. The region is still emerging from the COVID-19 pandemic and African countries have been hit by high borrowing costs and a cost-of-living crisis,” Georgieva said.

    She explained that the IMF agreed that policies to address the challenges facing the continent should aim at solidifying ongoing economic recovery, rebuilding buffers, and investing in the future to improve living standards.

    In countries with elevated and rising inflation, policy settings should be sufficiently tight to bring it down, Georgieva advised. 

    She said exchange rate, where appropriate, should be allowed to play its shock absorber role while mitigating the second-round effects of depreciation.

    “Fiscal policy should continue consolidating public finances and reducing debt sustainability risks while providing targeted social assistance to the most vulnerable. In resource-intensive countries, investing in education, managing better resource-based wealth, accelerating diversification will help improve living standards,” the IMF chief said.

    Read Also: How college workers, students attacked our operatives, by EFCC

    Georgieva also underscored the need to scale up concessional financing to support climate change adaptation and mitigation.

    Her words: “Large financing needs from infrastructure and social protection gaps are being exacerbated by climate change. While the African continent had a minor contribution to the stocks of greenhouse gases in the atmosphere, it is already bearing and is deemed to bear the largest costs from climate change.

    “At the same time, fiscal space remains constrained as buffers have been depleted during the crisis. Private sector participation will also be essential to fill the funding gaps.

    “The IMF  also agreed to enhance domestic resource mobilisation. In this respect, identifying the international best practices and leveraging specific country experiences is important while enhancing governance and accountability. Efforts to strengthen countries’ tax systems and to combat tax evasion and illicit financial flows should be accelerated.”

    Georgieva said the IMF remains actively engaged with African nations and continues to work towards strengthening their financing capacity to navigate challenging times and build a resilient and prosperous future.

    She added: “To continue to meet the needs of low-income countries in the region, after successfully reaching the fundraising target, the IMF is initiating a comprehensive review of the Poverty Reduction and Growth Trust (PRGT) facilities and financing with the objectives of ensuring its long-term financial sustainability and meeting strong demand.

    “In addition, achieving additional pledges to replenish the Fund’s PRGT is also key to securing much-needed concessional resources and unifying access limits between the IMF general resource and the PRGT.

    “The Resilience and Sustainability Trust (RST) is operational, providing longer-term affordable financing to address longer-term challenges, including climate change and pandemic preparedness.

    “To date, six out of the eleven countries benefiting from the RST are in Africa. The Group welcomed the substantial progress made on RST fundraising and urged potential contributors to go beyond the original target to meet growing needs.”

  • Why FDIs to emerging economies dropped, by IMF

    Why FDIs to emerging economies dropped, by IMF

    A report by the International Monetary Fund (IMF) on Foreign Direct Investment (FDI) inflows has indicated that over the last decade, the share of FDI flows among geopolitically aligned economies has kept rising, more than the share for countries that are closer geographically.

     This suggests that geopolitical preferences increasingly drive the geographic footprint of FDI.

    In an IMF report entitled: “Fragmenting Foreign Direct Investment Hits Emerging Economies Hardest”, said these trends also indicate that if geopolitical tensions continue to intensify and countries further diverge along geopolitical fault lines, FDI may become even more concentrated within blocs of aligned countries.

    The IMF said emerging market and developing economies like Nigeria are more vulnerable to FDI relocation than advanced economies, in part because they rely more on flows from more geopolitically distant countries.

    Nigeria’s FDIs dipped from $23.99 billion in 2019 to $5.33 billion last year.

    But the expectation of economic mangers is that auto manufacturing, aviation, rail industries are segments of the economy that should be stimulated to drive recovery of lost grounds on FDIs inflows.

    The fund said several large emerging economies are vulnerable to the relocation of FDI, indicating that fragmentation risk isn’t just concentrated in a few countries.The fund said a rise in political tensions could trigger a large reallocation of capital flows at the global level.

    Read Also: IMF backs bid to cut inflation, ease debt burden by countries

    To reverse the trend and boost foreign capital inflows to the economy, the Central Bank of Nigeria (CBN) led Monetary Policy Committee (MPC) suggested investments in auto manufacturing, aviation, and rail industries would help Nigeria attract more foreign capital to the economy.

    The apex bank said investment in these segments of the economy, will drive several other measures put in place to boost foreign capital inflows and forex liquidity.

    Analysts said recent policy on foreign exchange market reform would increase market transparency and encourage more foreign capital inflows.

    They advised the CBN to leverage  effective policies to attract remittances from diaspora to help moderate exchange rate pressures.

    “While reconfigured supply chains could potentially strengthen national security and help maintain a technological advantage over geopolitical rivals, re-shoring or friend-shoring to existing partners will often reduce diversification and make countries more vulnerable to macroeconomic shocks,” the IMF said.

    The Fund suggested that relocating FDI closer to source countries could hurt host economies through reduced access to capital and technological advances.

    “Our analysis finds that the entry of multinational corporations in foreign countries often directly benefits domestic firms. In advanced economies, increased competition from foreign firms spurs domestic enterprises to be more productive. In emerging market and developing economies, domestic suppliers benefit from technology transfers and increased local demand for components that end up being used in downstream industries,” the Fund said.

    These benefits, it said, are more likely when foreign companies enter a country to produce input that will be supplied to affiliated firms-think of the Samsung Electronics semiconductor factory in Vietnam that, makes products sold mainly to other units of the Korean conglomerate around the world.

    “This is because this type of vertical FDI is concentrated among intermediate-goods producers that deploy more sophisticated and skill-intensive technology.

    “Emerging market and developing economies are particularly affected by reduced access to investment from advanced economies, due to reduced capital formation and productivity gains from the transfer of better technologies and know-how,” the report stated.

    In the long term, FDI fragmentation arising from the emergence of geopolitical blocs can generate large output losses, especially for emerging market and developing economies. Multilateral efforts to preserve global integration are the best way to reduce the large and widespread economic costs of FDI fragmentation.

    IMF explained that while a range of factors has contributed to this protracted phase, the fragmentation of capital flows along geopolitical fault lines and the potential emergence of regional geopolitical blocs are novel elements that could have large negative spillovers to the global economy.