• Friday, March 29, 2024
businessday logo

BusinessDay

Nigeria got 3.4% of IMF’s $100bn facility for member countries since pandemic began

Nigeria got 3.4% of IMF’s $100bn facility for member countries since pandemic began

Since the Covid-19 pandemic began, countries all over the world have faced an urgent and unprecedented balance of payments and financing needs, which created an immediate and record-breaking demand for International Monetary Fund (IMF) resources.

As a result, the International Monetary Fund said it committed over $100 billion to help members in need since the pandemic began –this includes providing low-income members with much-needed debt relief, extended until April 2021, and concessional lending—including about 10 times more such lending since the crisis hit than IMF usually disburse in a year.

In the review year, IMF approved $3.4 billion Rapid Financing Instrument (RFI) for Nigeria as COVID-19 emergency financing package. The country has been hit hard by the pandemic, particularly because of the associated plunge in the price of oil—Nigeria’s top export commodity.

“Our response was comprehensive, supporting both members that entered the crisis with vulnerabilities such as high debt and those that have good fundamentals but needed buffers”, Kristalina Georgieva, Managing Director, IMF said in the recently released 2020 annual report titled “A Year Like No Other”.

This annual report reflects the policy advice, lending, and capacity development work of the IMF to help its member countries before and during the pandemic—with a focus on policies for people that recognize the impact of macroeconomic policies on individuals.

The report also highlighted how IMF deepens its work on debt sustainability, governance and the control of corruption, social spending, financial technology and digital money, and climate change.

“National governments took bold steps to save lives and put a floor under the world economy, with nearly $12 trillion in fiscal actions and about $7.5 trillion in monetary actions.

“The package of measures endorsed as part of the quota review approved by the Board of Governors in February 2020 preserves our financial firepower. These measures include the doubling of the New Arrangements to Borrow and a new round of bilateral borrowing arrangements, which are expected to be effective in January 2021,” Georgieva noted.

Read also: Covid-19: Nigeria to receive 100,000 doses of Pfizer vaccine before end of January

She said that member countries also stepped up with essential contributions to “our Catastrophe Containment and Relief Trust and Poverty Reduction and Growth Trust.”

All over the world, people have seen profound changes in their lives: economic recession, unemployment, climate change, technology and the automation of jobs, the rise of digital currencies, lower returns on their savings, and rising inequality and debt.

“In response to the crisis, we quickly focused on our members’ most critical needs. We streamlined our procedures and rapidly embraced remote work to speed up decision-making, policy discussions, technical assistance, and training. We created a policy tracker summarizing the key economic responses of 196 economies, because sharing information, data, and analysis is a unique way we can add value for our members.”

“While the IMF has taken unprecedented action, the outlook remains uncertain. Countries now face a long ascent that will be difficult, uneven, uncertain, and prone to setbacks.

“With substantial space in our $1 trillion lending capacity, the IMF is ready to help even more. Working with our members—now numbering 190 with the addition of Andorra—we can build a recovery that is more resilient and inclusive for all”, Georgieva said.

IMF further noted that low interest rates for over a decade have led to a buildup of global financial risks and historically high levels of government and private debt in most countries. “These debt vulnerabilities have significantly increased with the pandemic and the Great Lockdown, which has led to large increases in debt and deficits beyond those recorded during the global financial crisis. As countries fight the pandemic, they have committed to spend whatever it takes to save lives, protect people from losing jobs and incomes, and spare companies from bankruptcies, while supporting a recovery”, the Fund further stated.

It further noted that low interest rates make borrowers more vulnerable if interest rates rise, and they erode bank profits, which hampers banks’ ability to lend money to businesses so they can grow.

“The pandemic hit many vulnerable low-income countries hard: 50 percent of these countries are at high risk of debt distress. Economic shocks like the spread of a global virus can stall their economies and reverse financing flows, which further complicates their ability to manage their debt.

“The IMF, along with other partner institutions, has worked with low-income countries to help strengthen their debt management and transparency practices. This includes providing technical support as countries develop and publish debt management strategies and debt reports.

Also, given the financing needs to achieve the Sustainable Development Goals, the IMF and the World Bank (under the aegis of the Group of 20) developed operational guidelines for sustainable lending practices” IMF noted.