IMF: No Blanket Debt Cancellation for Nigeria, Ghana, other African Economies

The International Monetary Fund (IMF) has dismissed the possibility of total debt cancellation for Nigeria, Ghana, and other African economies.

Speaking during the African Session, at the on-going IMF/World Bank Annual Meetings, in Marrakech, Morocco, IMF African Department Director, Abebe Selassie said 50 percent of total debts in Sub-Sharan countries were domestic, making debt forgiveness difficult.

The Debt Management Office (DMO) data showed that Nigeria has a total debt stock of $113.4 billion as of June 30, 2023.

Selassie, who spoke on the theme: “In Pursuit of Stronger Growth and Resilience”, said there was no super magic to wave and get rid of debts, adding that there should be country-specific dialogue on how to reschedule the debts.

He said how the debts would be handed boiled down to discussing with creditor nations on the way out of the crisis.

Selassie said where there was a rise in private investment and consumption was expected to lift growth in many parts of the region by 2024.

He said growth in the region, was greatly subdued, adding that inflation was gradually dropping.

He said inflation remained too high in many countries and monetary and fiscal policies should work together to keep it under check.

He said too many countries were struggling to maintain growth and have sustainable jobs.

The IMF said it had loaned $80 billion between 2020 and today to Sub-Saharan African economies for emergency funding and Special Drawing Rights (SDR) allocations.

Also speaking at the opening press conference, World Bank Group President, Ajay Banga, said interest rates would stay higher for longer, likely complicating investments across the world.

The Central Bank of Nigeria (CBN) and other central banks in many parts of the world kept raising interest rates in order to tackle elevated inflation.

He said resigning inflation had caused many central banks to keep monetary policy rates higher than anticipated.

World Bank’s Chief Economist, Indermit Gill, said countries like the US and India were bright spots in the slowing global economy.

For comparison, the agency expects advanced economies to grow at 1.5 per cent and 1.4 per cent in 2023 and 2024, respectively.

Gill said the World Bank expected the impact of interest-rate tightening to be felt beyond the next couple of years, and countries with high bilateral/multilateral debt to face further challenges, including bankruptcy.

He said: “The big problem is that growth is slowing down to a much lower level than we had seen during the crisis. Even countries that are not in debt trouble but have high levels of public debt (are seeing) those debts crowding out private investment.”

Banga said he had outlined measures to make the agency bigger, better, and more output-focused, which would give it an incremental lending capacity of $150 billion, 15-20% higher than current levels, over the next decade.

About $40-50 billion of this will come from loan to equity contributions of donors, and $100 billion from portfolio guarantees, hybrid capital, and other initiatives.

“A great deal of work has gone into capital adequacy of the bank. The bank was able to move its loan into equity ratio that generates $40 billion additional lending capacity in the coming decade,” he said.

Banga said hybrid capital and portfolio guarantees, which could help donor countries pump capital into the World Bank without altering the shareholder base, could be leveraged six to eight times over a decade.

The World Bank under his leadership is focused on addressing the triple challenges of pandemic, climate change, and food insecurity.”