The International Monetary Fund (IMF), yesterday, raised the alarm that low income countries (Nigeria inclusive) are expected to suffer a double shock from higher borrowing costs and a decline in demand for their exports.
It added that the rising debt levels among these countries is currently hampering their ability to respond to new economic challenges.
The IMF Director of Research Department, Pierre-Oliver Gourinchas made the disclosure while releasing the World Economic Outlook report in Washington DC, yesterday.
He said efforts were on to stem the tide as the development could fuel poverty and hunger if unaddressed.
The Fund also had an unfriendly verdict on the global economy, estimating that growth will slow more than expected this year.
It now expects global growth to remain at close to 3percent for the next half decade — its lowest medium-term prediction since the 1990s.
It added that close to 90percent of the world’s advanced economies will experience slowing growth this year, while Asia’s emerging markets are expected to see a substantial rise in economic output — with India and China predicted to account for half of all growth.
The IMF said the “anemic outlook” reflects the higher interest rates needed to bring down persistent inflation, the deterioration of financial conditions amid banking turmoil, the war in Ukraine and growing geo-economic fragmentation.
The Debt Management Office (DMO) on March 30, disclosed that new borrowings by the Federal Government and sub-national governments, primarily to fund budget deficits and execute projects swelled the country’s debt portfolio to N46.25trillion or $103.11billion.
It added that the issuance of promissory notes by the FGN to settle some liabilities also contributed to the growth in the debt stock.
“On-going efforts by the Government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilization initiative are expected to support debt sustainability.
“Meanwhile, the total public debt to Gross Domestic Product (GDP) ratio for December 31, 2022, was 23.20percent and indicates a slight increase from the figure for December 31, 2022, at 22.47percent.
“The ratio of 23.20percent is within the 40percent limit self-imposed by Nigeria, the 55percent limit recommended by the World Bank/International Monetary Fund, and the 70percent limit recommended by the Economic Community of West African States”, the DMO explained in a statement.
Nonetheless, the Federal Government spent 41per cent of the revenue generated in 2022 to service its debts.
Recently, Moody’s Investors, a US-based credit rating agency downgraded Nigeria’s sovereign debt from B3 to Caa1 over weak oil revenues.