IMF boss, Lagarde cautions Nigeria on public spending
Despite apparent discomfort many Nigerians feel when government cuts down on public spending, especially regarding removal of oil subsidy, the Managing Director of the International Monetary Fund, Ms Christine Lagarde has urged government to be extremely cautious in its public spending.
Addressing a world press conference in Washington DC as part of the activities lined up for the IMF Spring meetings (2015), the IMF boss, noting that the country is already making efforts in this direction, however, stated that the momentum must be intensified.
“On the issue of the eight African countries that are oil exporters, some of which actually benefit as a result of dollars appreciation, you get dollar pricing for the oil you export and sometimes this helps to cushion the decline in oil pricing. But the point must also be made that some of these countries also acquire loans which are dollar denominated.
“They have to try to be cautious with public spending. We will still recommend that any subsidy that is being paid out on physical resources be phased out to the possible maximum extent.
This is already happening in Nigeria, but more still need to be done, as quickly as possible, especially if it is not being engaged in sectors of the economy where they are not being done”, she added.
Also at the event were the first Deputy Managing Director of the Fund, David Lipton, and Director of the Communications Department, Gerry Rice. But speaking to The Guardian earlier, Lipton likened criticisms of the IMF prognosis to a patient and doctor relationship. According to him, “The situation is like a patient being angry at the doctor because he or she does not like the prescribed drug; because the drug is better.
But the truth is that the prognoses are a lot less severe than what would eventually happen if we had not come.” The major goal of this year’s meeting is focusing intensely on one of the goals of the IMF as captured in ending poverty by 2030.
The world, according to the body, has had great success in the last 25 years in lifting people out of poverty; an astounding two-thirds reduction in the percentages.
Currently, fewer than 1 billion people live in extreme poverty, “and we must now reexamine our strategies to lift the final billion out of poverty and into the modern world,” said the World Bank president, Jim Yong Kim, in another opening press conference. Meanwhile, Nigeria’s voting shares in the IMF is expected to appreciate, especially in the face of growth recorded in the communication, entertainment and other non-oil related sectors of the economy as captured in the 2014 rebasing of the economy.
Despite gradual depletion of its GDP from an all time high of 10.0 percent in 2010 to the projected 4.8 percent low in 2015, the Nigerian economy has grown in volume.
The IMF has little choice but to consider an upward review of the quota allotted to Nigeria when it completes the review of the current quota by December 15, 2015 – the deadline under the Article of Agreement. A comprehensive review of the quota formula was completed in January 2013, when the Executive Board submitted its report to the Board of Governors.
The outcome of this review is expected to form the basis for the Executive Board to agree on a new quota formula as part of the 15th Review. However, work on the 15th Review has been delayed, pending implementation of the 2010 Reforms, chiefly as a result of the misgivings by the United States of America, which holds the largest voting share of the Fund.