Conditions for Debt Cancellation in Nigeria, Ghana, and Other African Nations – What the IMF Demands

Conditions for Debt Cancellation in Nigeria, Ghana, and Other African Nations – What the IMF Demands

Nigeria, Ghana, and other African countries must meet for possible debt cancellation. This development comes amid growing global sentiments for debt relief measures for African countries grappling with the economic fallout of the Covid-19 crisis.

“It is important that IMF-supported programs help address these countries’ debt vulnerabilities and are consistent with a return to a sustainable debt path.” – IMF Spokesperson.

The IMF has stipulated a number of conditions. These encompass fiscal measures, monetary restraint, and structural reforms aimed at bolstering the African countries’ economies. The measures come against the backdrop of rising debt distress indicators, exposing these countries to heightened financial risks. 

• Fiscal Measures: The IMF has necessitated that countries implement fiscal discipline to manage their public debt levels effectively. This includes prudent budgeting and curbing of wasteful government expenditures.
• Monetary Measures: The fund requires that countries undertake monetary restraint to avoid the dangers of hyperinflation which can erode economic gains. This primarily includes keeping inflation rates at manageable levels.
• Structural Reforms: Structural adjustments in areas such as public finance management, corruption, and business environment have been emphasized. These reforms are aimed at enhancing the efficiency of these economies and fostering economic growth.

The IMF’s focus on these areas underscores its commitment to assisting these countries tackle their debt challenges while promoting sustainable economic growth. The effective implementation of these measures will be crucial to ensuring the long-term financial stability of these nations.

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Nigeria’s total debt stock skyrocketed

According to the Debt Management Office (DMO), Nigeria’s total debt stock stands at N87 trillion as of June 30, 2023.

The IMF African Director stated there is no magic wand to wave and get rid of debts, saying there should be country-specific discussions on debt rescheduling.

Selassie said debts will be handled based on discussions with creditor nations on the way out of the challenges.

The Nation reports that Selassia revealed that where there is no rise in private investment and consumption, it is expected to lift growth in many parts of Africa by 2024.

IMF asks African countries to reduce inflation

Per the IMF Chief, Africa was remarkably subdued, and inflation is gradually declining.

Per Selassia, inflation in Africa remains high, and monetary and fiscal policies should work together to control it, stating that too many countries struggle to maintain growth and have sustainable jobs.

In the last decade, the agency had loaned about $80 billion to African countries for emergency funding and Special Drawing Rights (SDR) allocations.

As of September 2023, IMF’s SDF to Nigeria is 2147.69 million; Special Drawing Rights (SDR): 3363.51 million; Quota (SDR): 2454.5 million.

In 2022, the IMF cautioned Nigeria and other developing countries against taking loans from China due to unfavorable loan conditions.

African countries increase the tempo of debt cancellation

Nigerian and other African countries are increasing their requests for debt cancellations within the G24 countries.

The G24 presented a series of proposals to the IMF and the World Bank at the ongoing IMF/World Bank meeting at Marakesh in Morocco.

The G24 members expressed their fears over developing countries’ increasing public debt.

They stated that the countries need help with unsustainable debt, making it hard to meet their debt-servicing obligations.

Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, said the G24 statement urges efficient debt resolution mechanisms to support post-pandemic recovery.

Edun asked the G20 members to eliminate export restrictions on fertilizer and grains.

Debt Stock: Nigeria’s most indebted geopolitical zones in 2022

The DMO earlier said Nigeria’s total debt stock hit over N41 trillion as of March 2021.

The breakdown of the debt, tabulated by WOTHAPPEN, shows that the various states in Nigeria contribute immensely to the national debt stock.

According to reports, Nigeria’s total public debt stock rose from N39.56 trillion in December 2021 to N41.60 trillion, $100.07 billion in the first three months of 2022, January to March, the Debt Management Office (DMO) revealed yesterday.