Tough times ahead, IMF warns

Speaking during Managing Director’s Briefing on the Global Policy Agenda, IMF Managing Director, Kristalina Georgieva, said  the Fund has seen not only energy price going up, but fertilizer prices increasing, shipping costs rising, and all expected to reduce output, production, and consumption.

Georgieva spoke at the ongoing World Bank/IMF Spring Meetings in Washington DC.

Nigeria is one of biggest oil exporting countries in the world, earning over 70 per cent of its foreign exchange (forex) from crude oil exports. With oil prices staying above $92 per barrel, Nigeria’s forex earning from crude oil sales is bound to rise.

Georgieva noted that the rising oil prices will generate windfall for Nigeria, and other oil exporting countries.

She said with delay in oil consignment getting to their destinations due to the crisis, the volatility in oil prices and supply gaps may worsen this month.

Georgieva advised governments to help companies and people hit by the exogenous supply shocks.

She said that for Nigerian other oil exporting countries, the oil prices is going to generate some windfall.

 She said: “The fiscal cost for countries still implementing oil subsidy is going to be massive. However, for many countries, there is still needed to build buffers. And in many countries, revenue mobilization is a priority, given that interest rate to revenue stay quite high, about 15 per cent for many low income countries”.

Division Chief, Fiscal Affairs Department, IMF, Davide Furceri, who spoke during the Fiscal Monitor press said the conflict is forcing governments to choose between shielding their populations from price spikes and preserving fiscal space.

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“Its fiscal impact is highly asymmetric. Energy-importing countries, particularly low-income developing countries, face the largest costs, while the pool of potential beneficiaries is narrower than in past energy shocks, as major Gulf exporters are themselves directly affected by the conflict,” Furceri said.

He noted that the conflict in the could further strain government finances through higher food and fuel prices, tighter financial conditions, lower activity, and rising defense outlays; in a scenario of prolonged conflict, global debt-at-risk could increase by an additional four percentage points.

He explained that for low-income countries, declining levels of external aid make domestic revenue mobilization essential, and evidence suggests that well-executed reforms to tax administrations can deliver meaningful gains.

He said: “Higher energy and food prices, tighter financial conditions, and greater uncertainty are once again prompting calls for fiscal support. In shaping their responses to this shock, countries will need to carefully consider the balance between protecting the most vulnerable and preserving market price signals”.