IMF annual meeting to emphasise forex reforms

*Christine Lagarde, IMF managing director.

17 April 2017, Lagos – The International Monetary Fund will reiterate its call for foreign exchange reforms and naira devaluation at the World Bank/IMF Spring Meetings in Washington DC, United States this week.

The event, which holds from April 17 to 23, will have top delegates of the Federal Government in attendance.

The Minister of Finance, Mrs. Kemi Adeosun, and Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, are expected to lead delegates from the fiscal and monetary authorities to the event.

Top bankers and government officials from the financial services industry are expected to be at the event.

The IMF had a fortnight ago said the naira was overvalued by between 10 and 20 per cent against the United States dollar, reiterating calls for the devaluation of the local unit.

Following the conclusion of its Article IV meeting in Nigeria, the Washington-based fund has also said Nigeria needs to carry out aggressive reforms to enhance economic growth and development.

The text of the Article IV report read in part, “The slump in oil prices and production and an inadequate policy response are increasing unemployment and undermining efforts to reduce poverty. The authorities took some steps in 2016 to reduce vulnerabilities, mainly by deregulating fuel prices, increasing the monetary policy rate, and allowing currency depreciation to reduce the exchange rate misalignment.

“However, further actions are urgently needed to tackle the low revenue effort, large infrastructure deficit, rising debt service, double-digit inflation, and a foreign exchange market marred by restrictions. These actions need to be supported by continued efforts to counter militant activity in the Niger Delta and an insurgency-related humanitarian crisis in the North East.

It added, “The authorities’ Economic Recovery and Growth Plan, published March 7, is a welcome step forward. It appropriately focuses on private sector led economic diversification, supported by government efforts to strengthen infrastructure and the business environment. But without stronger macroeconomic policies—notably higher non-oil tax collections (to create fiscal space) and a more transparent foreign exchange regime (to facilitate adjustment and promote diversification)—the plan will not meet the objectives of fostering higher growth and employment.”

On the outlook and risks, the IMF said, “Under the policies being implemented in early 2017, the outlook is challenging, with growth expected to remain flat and macroeconomic imbalances to persist. Downside risks include further delays in implementing reforms, an intensification of militancy activities, and worsening global risk aversion. If action is delayed further, risks of a disorderly exchange rate adjustment will increase.”

 

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