IMF cuts growth projection, warns Nigeria, others on rising debts

International Monetary Fund (IMF), the global economic advisory body, has again cut the world’s growth forecast for this year, and warned against compounding more debts, with emphasis on developing nations to avert derailing their sustainable goals.

IMF also warned nations with high debt stock to be wary of new listing, among them Nigeria, whose debt has risen from about N11 trillion in the last five years to a new high of N24 trillion as at December 31st, 2018, with the debt burden (debt to GDP) growing from 18 to 19 per cent according to the Debt Management Office (DMO) last week.

“Global growth is set to moderate in the near term, then pick up modestly. As a result of these developments, global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 per cent in 2020.

“Growth for 2018 was revised down by 0.1 percentage point relative to the October 2018 World Economic Outlook (WEO), reflecting weakness in the second half of the year, and the forecasts for 2019 and 2020, are now marked down by 0.4 percentage point and 0.1 percentage point, respectively,” the Fund said in its revised new World Economic Outlook for 2019 released in Washington, at the on-going 2019 Spring IMF/ World Bank Meetings.

It explained that the revised growth projection followed a confluence of factors, which affected major economies, including China’s growth declined following a combination of needed regulatory tightening to rein in shadow banking and an increase in trade tensions with the United States. The Euro area economy also lost more momentum than expected as consumer and business confidence weakened.

For sub-Saharan Africa, the new revised outlook said: “The outlook is surrounded by significant downside risks, particularly considering the elevated policy uncertainty in the global economy.

“ Shielding the recovery and raising medium-term growth would require reducing debt vulnerabilities and creating fiscal space through more progress on domestic revenue mobilization, and policies to achieve strong sustainable and inclusive growth.”

Reacting to the warning, a Development Economist, Odilim Enwegbara, described as dangerous and worrisome, the continuous piling of debts by the current administration and declared that the only way of checking the malaise is to allow the Public Private Partnership (PPP) policy to work in Nigeria.

His words: “The recklessness with which the Buhari administration is piling debts is dangerously alarming. Our debt burden has become synonymous with buharinomics, which as feudalist socialism is growing big government (recurrent spending) without corresponding growth in productivity.

“Growth in debt as a result of buharinomics being synonymous with bloated infrastructure investment cronyism, where government apologist contractors are allowed to squander billions of dollars and trillions of naira borrowed and spent on the wrong infrastructure development, and infrastructure spending without conducting holistic debt sustainability analysis.

“Borrowing cannot be stopped when top fiscal authorities are conniving with banks to continuously load expensive debts on government while doing everything to frustrated efforts to increase tax revenues.

“Take the tragedy of the ongoing billions of dollars borrowed from China for the construction of obsolete monorails between Abuja and Kaduna, and between Lagos and Ibadan, which if done by profit maximising private sector firms would have cost a fraction of the bloated government spending.

Had buharinomics not been also infrastructure development socialism, modern multi-rail speed trains for cargo and humans would have been built across the country with the highest return-on-investment being the single driving force.

“The only way to stop this recklessness is to allow the private sector, not government to drive critical infrastructure investment. Also, government should drastically reduce its recurrent spending by downsizing its workforce and unnecessary government spending in the false name of the day to day running of the affairs of government.

“Most important is the urgency for fiscal federalism so that with all the states and regions mining their businesses, federal government will have fewer responsibilities, including wasteful ones currently costing it trillions of naira,” Enwegbara added.

Furthermore, Eurodad, a European network on debt and development, also warned that progress in sustainable development goals (SDGs), could be derailed or even reversed thus lifting poverty and inequality if not checked by highly indebted countries.

“High debt levels became a key constraint for spending on infrastructure projects and public goods in poor countries. Every Euro that is given to creditors is a euro that does not go to poverty eradication and sustainable development,” according to Bodo Ellmers, head of policy at Eurodad.