The International Monetary Fund (IMF) has called on the Federal Government to increase its domestic revenue through tax to meet its budgetary deficit obligations.
The IMF made the call in its briefings at the launch of the Global Financial stability Report with the theme ‘Navigating the High-Inflation Environment.’
The Global Financial Stability Report (GFSR) assesses key vulnerabilities the global financial system is exposed to. In normal times, the report seeks to play a role in preventing crises by highlighting policies that may mitigate systemic risks, thereby contributing to global financial stability and the sustained economic growth of the IMF’s member countries.
The Divisional Chief, Fiscal Affairs Department IMF, Paulo Medas responding to a question on Nigeria’s continued pursuit of an expansionary fiscal policy in contrast to tightening monetary policies, Medas said: “Nigeria has benefited from higher oil revenues. We haven’t seen an improvement in the deficits as we hoped, partly because of the large energy subsidies, but also other issues with the production of oil and other pressures on the budget.
“So, our recommendation is to try to save some of these oil revenues but also address these emergency needs. Another aspect I would say is that Nigeria is one case where tax revenues are really low and this really undermines the capacity of the government to mark these types of shocks and to provide key services.”
He further advised Nigeria to increase its domestic revenue through tax to meet its budgetary deficit obligations.
He said: “I would say in the case of Nigeria, where the priority is really domestic revenue mobilisation you need to increase the state capacity to address the needs of the country. And this will also help make fiscal policy work consistently in efforts to ensure economic stability.”
“Governments are facing a very difficult environment where many countries have digit inflation and in this aspect, fiscal policy needs to help monetary policy by working together to ensure price stability.
“This is absolutely critical for stable growth and for some public finances in the countries. Countries like Nigeria, especially those that are oil exporters can take advantage of rising commodity revenues to address some of these needs and to reduce debt.”
… Says developing economies need significant climate financing
Developing economies alone will require up to $300 billion a year by 2030 to adapt agriculture, infrastructure, water supply, and other parts of their economies to counterbalance the physical effects of climate change (UNEP 2021).
The report argues that the magnitude of emerging market and developing economy climate finance needs will require significant scaling up of private sources of finance.
The public sector response to the COVID-19 pandemic has placed a burden on public finances in many of these economies, and borrowing costs are rising as central banks worldwide tighten policy to tackle high inflation.
Underinvestment in climate change mitigation and adaptation in emerging market and developing economies may lead to global financial stability risks through greater exposure to systemic climate-related financial risks.
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