IMF Issues Warning To Nigeria And Other Sub-Saharan Countries On Increasing Loan Debts
The IMF has issued a warning about risk of unpaid debts as Sub-Saharan African countries continues to borrow billions of dollars from international financial institutions such as the World Bank, International Monetary Fund (IMF) and African Development Bank (AfDB).
The IMF cautioned that the amount so far released as loans by international financial institutions to sub-Saharan African countries and emerging markets generally during the COVID-19 pandemic is unprecedented.
In the stability report released on Thursday, the IMF cautioned that the debt levels were rising and potential credit losses resulting from the insolvencies could test bank resilience in some countries amid the COVID– 19 pandemic.
This warning was contained in the IMF latest global financial stability report update released on Thursday, June 25.
According to the Washington Based Fund, over US $10billion has been disbursed in loans to close to 30 countries in sub-saharan Africa to respond to COVID–19 pandemic.
The international fund noted that the amount is “unprecedented and 10 times more than what the IMF has been disbursing to the sub-saharan Africa annually on an average of US$1billion each year.”
These loans become more tempting because they are without the stringent conditions that have accompanied previous borrowings in pre-COVID-19 era. The interest rate is also lower and that fuels the appetite for more financial assistance.
While the reason given for these escalating borrowings is to fight the lethal virus and reposition economies devastated by the pandemic for growth, the IMF advised countries to spend the COVID–19 funds wisely as well as keep receipts for accountability and records.
In Nigeria, however, Minister of Finance, Budget and planning, Mrs Zainab Ahmed, has said the country would not request a delay in debt-service payments this year from bilateral and commercial creditors. She reportedly revealed this during a call-in session forum with investors organized by Citigroup on Wednesday.
It was gathered that nearly half of Nigeria’s outstanding external debt is with multilateral lenders. According to the debt management office, the World Bank Group is Nigeria’s top creditor with $ 10.1 billion in loans. Beijing-based Export-Import Bank of China is the second largest single creditor with loans totaling $3.2billions, while Eurobonds account for $10billion or 39percent of external debt.
The latest ‘handout’ came on Thursday from World Bank in the form of Intervention. The world bank approved a $750million for Nigeria. The intervention, according to the Washington-based international financial institution, is part of the bank’s ‘Power Sector Recovery Operation (PSRO).