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Coalition urges World Bank, IMF to reduce interest rates to end debt, food crisis

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Marrakech (Morocco), Oct. 13, 2023: A coalition of faith-based organisations, Jubilee USA, has urged the World Bank and the international Monetary Fund (IMF) to stop the debt and food crises of low-income nations.

Eric LeCompte, Executive Secretary of the group, said this on Thursday in Marrakech, on the sidelines of the ongoing World Bank/IMF Annual Meetings.

LeCompte said that the it could be done by stopping the “ridiculous policies” of raising interest rates.

According to him, development banks can help address debt crises by ensuring that debt contracts have clauses where debt payments stop in the face of disasters and by promoting swaps, transparency and accountability.

“If wealthy countries donate Special Drawing Rights to development banks, we can put more resources where it is most needed

“As poor growth is forecasted for the global economy, it will be very difficult for developing countries to recover from the pandemic and food crises,” he said.

He, however, said that the World Bank listing of eight global challenges was helpful because they all dealt with aspects of poverty.

According to him, it is important that the World Bank tackles more global challenges, but we have no idea where the money is coming from to do that.

“We need to do a better job at responding to the climate, food, and inflation crises in the poorest countries.

“Unless we deal with high debt, we will not have the resources to address these crises.

“Some good news on getting new resources is that there is growing momentum to increase resources for development banks, ” he said.

NAN reports that World Bank and IMF are holding annual meetings in Marrakech, Morocco, Africa, for the first time in 50 years.

debt

Nigeria can’t survive on debt at 63rd Independence

Lagos, Oct. 8, 2023: The Deputy Speaker of the House of Representatives, Benjamin Kalu, has expressed concern about Nigeria’s reliance on debt at 63 years of Independence anniversary.

Speaking at a stakeholders’ dialogue on the implementation of Section 45 of the Fiscal Responsibility Act, on Saturday in Lagos, Kalu said the nation needs to be self-sufficient and independent instead of relying on loans.

Kalu, represented by Mr Nalaraba Abubakar, Chairman, House Committee on Loans and Debt Management, said previous governments sustained budgets through loans but an approach he considered not sustainable.

He also said that the compliance of the provisions of Section 45 of the FRA remains crucial to the banks and other financial institutions before lending to any government of the federation.

“Lending by banks and financial institutions is contravention to the FRA 2007 is unlawful,” the  lawmaker said.

Kalu said it was imperative for banks and financial institutions to comply with the provisions outlined in Section 45 of the Fiscal Responsibility Act before they lend to the government.

He noted that it was essential to consider the authorised borrowing limit specified in the appropriation Act and adhere to the extant provisions of Section 45.

The deputy speaker expressed his disappointment that state governments were borrowing for consumption rather than focusing on long-term capital expenditure for production purposes.

According to him, the trend worsens the country’s inflation and inhibits economic growth.

Kalu urged state governments to explore their own potentials and enhance local production to increase internally generated revenue instead of relying solely on the Federal Government.

“We encourage states to stop depending on federal government and boost their local production, thereby increasing internally generated revenue.

“I commend FRC in its responsibility of keeping up with promoting a transparent and accountable government fiscal management framework for Nigeria,” the deputy speaker said.

 He, however, expressed disappointment that the authorities in charge of monitoring inflow of grants into the country had no proper record of the grants.

“These grants do not just pass through the thin air, but by processes, which the commercial banks are involved in.

“It is important for commercial banks to liaise with the government by making disclosure on the inflow of the grants,” he said.

According to him, accumulation of those aids and grants are crippling the economy, which has become unbearable.

Kalu confirmed that the 10th Assembly was prepared to introduce legislation that would bring transparency to the processes of grants entering the country.

He said it also plans to enact a law compelling commercial banks to disclose the sources of grants, their beneficiaries, and who holds custody of the funds.

He noted that these measures aim to provide greater oversight and accountability in the management of grants in the country.

The lawmaker said: “We have billions of dollars coming into Nigeria as grants, but cannot pin point where the grants are going into in the economy.

“So, it’s important that the commercial work together with the government to rebuild the country, because a bouyant economy would also contribute in the activities of the banks too.” 

debt

Benue in N359bn debt – Alia

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Makurdi, Oct. 2, 2023: Govrnor Hyacinth Alia of Benue on Sunday disclosed that his administration inherited the sum of N359 billion as debt from the past administration in the state.

Alia disclosed this at an interdenominational church service to commemorate Nigeria’s 63rd independence anniversary.

The church service was organised by the Christian Association of Nigeria (CAN), Benue State Chapter, at the Methodist Cathedral, South Bank, Makurdi.

The governor,  who is a Catholic priest, said  that in spite of the debt burden, he was determined to reposition the state by providing an enabling environment for businesses to thrive.

“God has accomplished his work,  and it is now left for us to make our state and nation to work. I am here to make things work.

“What we inherited was nothing to be proud of, but we will do what will make us all proud. I inherited over N359bn debt,” he said.

He regretted that the state lost billions of Naira worth of agricultural produce and other property to herders’ attacks on farmers.

He said that the farmers must be supported to do their job well.

Alia said that the condition of rural dwellers following incessant herders’ attacks and fuel subsidy removal had become worrisome.

He said that his administration would find ways to support farmers by providing seedlings, fertilisers and other forms of support to enable them to work effectively in the coming farming season.

“My colleagues call me the governor of the richest state in Nigeria and I agree with them because we have numerous mineral deposits, we have the best yams and soyabeans, among others.

“We will create billionaires in the state through our farms. We have everything it takes to do it.”

Alia  ordered  immediate end to illegal mining in the state.

“The foreigners illegally mining gold in Kwande, Logo, Konshisha LGAs and other places in the state should desist from it immediately. This is an order,” he said.

He said that God blessed the state and the entire Nigeria abundantly and it was left for the leaders to make things to work.

He decried the spate of kidnapping and other criminal activities in the state, pledging to tackle them.

The governor said that the future of the state lied in the hands of the youth, adding that his administration was  training 10,000 youths in information technology for improved digital knowledge.

Alia gave the assurance that his administration would not accommodate corruption and nepotism.

The governor appealed to Benue sons and daughters to support the state in any way they could.

debt-crisis

Nigeria’s public debt stock increases to N87.38trn

Abuja, Sept. 16, 2023: Nigeria’s public debt stock increased from N49.85 trillion (108.30 billion dollars ) in the first quarter of 2023 to N87.38 trillion (113.42 billion dollars ) in the second quarter of 2023.

The National Bureau of Statistics (NBS) said this on Friday in its Nigerian Domestic and Foreign Debt Report for Q2 2023 released in Abuja.

The report said Nigeria’s public debt stock which included external and domestic debt, grew by 75.27 per cent in Q2 of 2023

It said that External debt stood at N33.25 trillion (43.16 billion dollars) in Q2 2023, while domestic debt was N54.13 trillion (70.26billion dollars).

“However, the share of external debt to total public debt stood at 38.05 per cent in Q2 2023, while domestic debt was recorded at 61.95 per cent.’’

In a breakdown by states, the bureau said that Lagos State recorded the highest domestic debt of N996.44 billion in Q2 2023, followed by Delta at N465.40 billion.

The report showed Jigawa recorded the lowest domestic debt at N43.13 billion, followed by Kebbi at N60.94 billion.

In addition,  it stated that Lagos state recorded the highest external debt with 1.26 billion dollars , followed by Kaduna state with 569.38 million dollars.

“Borno recorded the lowest external debt with 18.75 million dollars , followed by Taraba with 21.92 million dollars,” the NBS stated.

debt-crisis

AU ropes debt management into Agenda 2063

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The African Union (AU) is pitching what it touts as a local solution to survive mounting debt for members. And the proposals could be tabled to member states as soon as the next summit, signalling the latest concerns about the potential of debt to drain economic targets.

The revelations emerged last week at a conference on debt in Dakar, Senegal where officials explained the policy direction.

Dr Patrick Dzana Olomo, the Policy Officer for Investment and Resource Mobilisation, Economic Affairs Department of the African Union Commission blamed Africa’s mounting debt on failure to put in place clear mechanisms on how to handle borrowed funds.

“As the AUC, we are setting up the African Debt Mechanism that will be adopted next year which will be a platform that will allow us to have information on debt and also to plan on how countries will engage in debt negotiations before getting the loans,” said Dr Olomo at the ‘African Conference on Debt and Development’, an annual forum.

While the decision to establish some form of debt observatory was announced earlier this year, African Union members are expected to adopt it from January 2024 to be in line with AU’s Agenda 2063.

 “It will also guide African countries on how they are going to engage in discussions when it comes to debt treatment. The AUC is playing that economic role of bringing together African countries to address issues related to debt,” said Olomo.

Experts in Dakar said Africa needs some form of profile table for creditors and debtors, enabling both sides to decide how to extend privileges.

Dr Ohio Omiunu, a professor of international law at Kent Law School (UK) and an editor at the AfroconmicsLaw, a portal on public investments policy, said the debt crisis requires a mechanism that brings all creditors on the debt table.

“Another option is the need to have a mechanism that is binding on all creditors. Currently the common framework does not bring the private creditors on the table,” said Dr Omiunu.

“Debt forgiveness should also be one of the options on the table. We have just come out of the Covid pandemic and therefore the very reason we need to bring the debt forgiveness on the table.”

Africa currently stands at the crossroads of two pressing challenges: a mounting debt crisis, and the urgent need for financing to combat climate change.

Rising rates are hurting some of its brightest economic stars as the rich countries renege on their promises to help fight debt.

As of 2022, Africa owed above $600 billion to external creditors, with an approximate $69 billion in debt service by the end of 2023.

Previously Africa’s sovereign debt was mostly acquired through loans from IFIs and bilateral lenders.

Since last year, five countries (Zambia, Ghana, Chad, Ethiopia, and Sri Lanka) formally defaulted on their national debt and applied to the G20’s Common Framework to resolve their debt crisis.

Across the continent several countries are beginning to show similar symptoms that indicate either defaulting or needing to apply to G20 Common Framework, some debt relief project by the richer lenders.

“Debt has risen cumulatively to over a trillion US dollars on the continent and this is quite a significant amount when you think about where the continent lies in social economic indicators,” said Jason Rosario Braganza, Executive Director of the African Forum and Network on Debt and Development.

Civil society leaders also called for proper utilization of debt to avoid using debt for recurrent expenditure rather than for development.

“We need to use our debt to develop infrastructure, improve health, agriculture and education sectors rather than waste on projects that largely attract corruption.”

In the just concluded Nairobi Climate Change summit, President William Ruto appealed to richer countries to reduce financial demands on very indebted African countries by calling for the extension period for countries’ debt repayments.

“We don’t want to suggest we want a debt write-off. No, we want to pay. One way would be to allow debt repayments to be extended and for a decade-long grace period to be introduced, allowing money to be invested elsewhere so that instead of spending billions of dollars paying debt this year, we use that to do other things. And then in 10 years we would have stabilised our economies,” said Ruto.

The EastAfrican

debt manager

Kenya’s national debt peaks

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Kenya borrowed the largest amount of money in a single year during President William Ruto’s first year in office, pushing the debt levels past the ceiling amid shortfalls in tax collections and increased repayment obligations.

Gross debt stock climbed Ksh1.56 trillion ($10.8 billion) for the financial year ended June, fresh data released by the Treasury shows, breaching the Ksh10 trillion ($69.52 billion) mark by Ksh189.53 billion ($1.32 billion).

Kenya ended the last financial year in June with a gross total debt load of Ksh10.19 trillion ($70.84 billion), a growth of 18.08 percent over Ksh8.63 trillion ($59.99 billion) a year ago, which was the last full fiscal year for former president Uhuru Kenyatta.

Lawmakers in June voted to convert the numerical debt ceiling to an anchor of 55 percent of gross domestic product (GDP), with the Treasury given five years to comply.

The jump in gross debt came in a fiscal year Dr Ruto, who was in charge for nine of the 12 months under review, made it clear his administration would cut borrowing.

Nearly Ksh1.43 trillion ($9.94 billion), or 91.52 percent, of the new gross debt, was contracted in the last nine months of the year under review, according to the Treasury data.

Dr Ruto, who partly rode to power on a pledge to make debt a “last resort” in raising funds to plug holes in the budget, had pledged not to make the nation “slaves of debt from any place or any country”.

He vowed to pursue policies, which enhance tax compliance levels and grow national savings from a measly “seven” percent of GDP towards 30 percent envisioned in Kenya’s long-term development blueprint, Vision 2030.

“I am looking forward to the day, soon enough, when we borrow from the savings of the people of Kenya to run our development instead of borrowing from other countries, and that is what holds the future for us,” Dr Ruto had said last September ahead of being sworn into office.

“I am encouraging the people of Kenya as we work together to get our economy out of the mud… that each and every one of us must pay their taxes and I am going to lead from the front, making sure I pay my taxes.”

Provisional official data, however, suggests the Ruto administration’s fiscal consolidation plan was roiled by underperformance in the main tax streams, which missed the Ksh2 trillion ($13.9 billion) by Ksh112.76 billion ($783.9 million) in an environment of a softening economy.

Foreign borrowing accounted for two-thirds of the jump in gross debt after Kenya contracted an additional Ksh1.06 trillion ($7.37 billion) from foreign creditors to stand at Ksh5.36 trillion ($37.26 billion).

Multilateral lenders — largely the World Bank Group, the International Monetary Fund (IMF) and African Development Bank (AfDB) — grew their credit to Kenya by Ksh728.85 billion ($5.1 billion), or 37.89 percent year-on-year, zooming past the Ksh2.65 trillion ($18.42 billion) mark.

Loans from multilateral lenders such as the World Bank and AfDB come on concessional terms, which average a 1.75 percent fixed interest rate, with a 35-year tenor and a grace period of up to 10 years.

This eases the burden of future repayments, unlike commercial borrowing like Eurobond where the interest rates are higher, currently double-digit, with shorter tenors.

The stock of debt taken from foreign commercial banks and rich countries increased by Ksh166.09 billion ($1.15 billion) and Ksh159.83 billion ($1.11 billion) in the review period, partly reflecting the impact of a weaker shilling, to close at Ksh1.36 trillion ($9.45 billion) and Ksh1.33 trillion ($9.25 billion).

Borrowings sourced from domestic sources such as commercial banks, pension funds and insurers through the sale of Treasury bonds and bills increased Ksh503.01 billion ($3.5 billion) to end June 2023 at Ksh4.83 trillion ($33.58 billion).

The IMF and the World Bank have since 2020 classified Kenya at a high risk of debt distress since 2020 as a result of persistently large deficits in annual budgets in more than a decade, which are bridged through borrowing.

Kenya’s debt binge is underlined by Eurobond offerings, a package of Chinese loans and syndicated commercial loans over the years which are now squeezing its finances as the loans fall due.

The Ruto administration, for example, spent Ksh1.16 trillion ($8.06 billion) on servicing maturing debt and interest for the year ended June, with the burden projected to rise to an estimated Ksh1.8 trillion ($12.51 billion) in the current year ending June 2024.

“I do believe that the fiscal framework of the National Treasury has incorporated all these debt service payments, including the impact of a higher exchange rate,” CBK Governor Kamau Thugge said on June 26.

“They have a plan to reduce the overall fiscal deficit and to achieve a sustainable debt position and fiscal position over the medium term.”

The EastAfrican

debt recovery

Russia writes off $23bn debt for Africa – Putin

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St. Petersburg (Russia) July 29, 2023: Vladimir Putin, Russian President, says the Russian Government has written off $23 billion debt owed by African countries.

Putin spoke at the plenary session of the ongoing second Russia–Africa Summit 2023 holding from July 27 to July 28.

He said Moscow would allocate an additional $90 million for these purposes.

Putin said Russia was advocating expansion of representation of African countries in the UN Security Council and other UN structures.

“Russia and Africa strive to develop cooperation in all areas and strengthen ‘honest, open, constructive’ partnership.

“Russia will also assist in opening new African embassies and consulates in Russia,” he said.

According to him, the reopening of embassies in Burkina Faso and Equatorial Guinea is going as planned.

He said sovereignty was “not a one-time achieved state,” and it must be constantly protected.

Putin also offered assistance to Africa in countering threats such as terrorism, piracy, and transnational crimes adding that it would continue to train personnel from African countries.

He assured that Russian businesses have a lot to offer partners from Africa.

Putin said transition to national currencies and the establishment of transport and logistics chains would contribute to the increase in mutual trade turnover.

“Russia is ready to provide trade preferences to Africa, support the creation of modern production sectors, agricultural sector, and provide assistance through relevant international structures and agencies.

“Russia will always be a responsible international supplier of agricultural products,” he said.

debt

Zambia debt restructuring to save $7.7bn by 2026, IMF says

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Johannesburg, July 14, 2023: International Monetary Fund (IMF) on Friday said Zambia’s long-delayed external debt restructuring will save the southern African country 7.65 billion dollars by 2026.

IMF made the statement in a report after it approved the latest payout from a 1.3 billion dollars rescue loan.

In September, IMF said the expected figure is lower than the 8.4 billion dollars debt relief that Zambia needed, which bilateral creditors including China and international bondholders had challenged due to the size of debt cuts that this entailed.

The IMF  in a staff report,  said restructuring the country’s overseas debt will cover 72 per cent, or 7.65 billion dollars of its balance of payments gap between 2022 and 2025.

The country’s overseas debt had reached 20.9 billion dollars at the end of 2022.

The IMF’s executive board on Thursday approved an immediate disbursement of 189 million dollars to Zambia following its first review of the programme.

This came after the country secured a deal in June with official bilateral creditors to rework about 6.3 billion dollars of its overseas debt with Paris Club members and China, among others.

Zambia was the first African country to default on its sovereign debt in 2020 during the COVID-19 pandemic, and faced lengthy delays in restructuring negotiations.

The IMF report said Zambia’s official creditor committee met seven times after forming in June 2022 and held “several technical workshops” with points of contention including the exclusion of overseas local bondholders from the restructuring.

Foreign holdings of domestic debt fell from 29 per cent at the end of 2021 to 22 per cent a year later, a proportion maintained in the first third of 2023, it said.

“Uncertainty around the debt restructuring process has led to a sharp drop in investor demand for domestic government securities,” the report said.

Using a contingent debt instrument where Zambia will pay more if its economy performs better emerged as a solution at the third official creditor meeting in January, with the agreement finally reached on June 22, the IMF said.

East+Africa+debt

FG intensifies debt recovery, urges MDAs to key

Asaba, July 5, 2023: The Federal Ministry of Finance, Budget and National Planning (FMFBNP), has urged all federal Ministries, Departments and Agencies (MDAs) to  key into its debt recovery policy to improve  government revenues.

The ministry said that it has recovered over N58 billion out of about N5.2 trillion owed by over 7,000 debtors to 11 MDAs in the past three years through its Project Lighthouse policy.

The Director, Special Projects, FMFBNP,  Mr Victor Omota, made the disclosure at the South -South Zonal Sensitisation Workshop on Federal Government Debt Recovery Drive Through Project Lighthouse on Tuesday in Asaba, Delta.

He said efforts were been intensified to track all the debts owed the MDAs by its clients to ensure improved revenue to the government.

“It may interest you to note that the Ministry through the consolidation efforts of the Debt Analytics and Reporting Application has been able to aggregate monumental debts of approximately N5.2 trillion.

“These debts came to the spotlight from data aggregated from over 7,000 debtors across 11 MDAs. The debt aggregation effort is still ongoing,” he said.

Omota, represented by Mrs Bridget Molokwu, deputy director in the ministry, said that the Project Lighthouse was designed by the federal government through collaboration with the 946 federal MDAs to recover all debts owed and to tighten  the revenue loopholes and leakages.

“You will recall that one of the key economic policy objectives of the current administration, as contained in the Economic Recovery and Growth Plan (ERGP), is improving Federal Government revenues by targeting and increasing revenues from non-oil revenue sources.

“An important part of our policies and strategies is to leverage big data technology to help block revenue loopholes, identify new revenue opportunities, optimize existing revenue streams especially non-oil revenue as well as improve fiscal transparency.

“In actualizing this goal, the FMFBNP initiated ‘’Project Lighthouse’’, which is one of the portfolio projects under the Strategic Revenue Growth Initiative (SRGI).

“This initiative has enabled the aggregation of relevant economic and financial information from multiple agencies who hitherto did not share data,” Omota said.

According to him, revenue loopholes have been aided by poor information sharing and enforcement.

“Data from Project Lighthouse revealed that many companies and individuals who owe government agencies, have refused to honour their obligations.

” In spite of the debt, the debtors  were still being paid especially through the government platforms such as GIFMIS and Treasury Single Account (TSA) due to lack of visibility over this transactions.

“These debts are in the form of debt liabilities to the Federal Inland Revenue Service (FIRS); refunds to the Government by companies who failed to deliver on projects for which payment had been effected.

“Also unpaid credit facilities granted to both corporate entities and individuals by the Bank of Industry (BOI) and Bank of Agriculture (BOA); judgment debt in favour of Government, debts owed Pension Transitional Arrangement Directorate (PTAD) by Insurance Companies, others.”

He noted that the ministry collaborating with the MDAs would promptly help to recover these debts and address these major revenue loophole.

According to him, government has issued a Ministerial directive on Sept. 26, 2019 to all MDAs, with a view to aggregate all Government debt across the Public Finance Space as well as to have a single window on the credit profile of Government.

“Also, the Federal Executive Council (FEC) regulatory approval on Wednesday, March 31, 2021, extended the functionalities of Debt Recovery Capability of Lighthouse to enable the FMFBNP  fully automate the debt recovery process and make settlements of debts as seamless as possible,” he said.

In an interview with Mr Abraham Atteh and Mr Suleiman Tambaya, Consultants to FMFBNP, they opined that government could deliver more social services to the citizenry if it could recover all debts owed it from the MDAs to improve its revenues.

They said that the idea behind Project Lighthouse was to collaborate with the 946 MDAs of the federal government to track and recover debts owed them using designed technological system.

According to Atteh, the Project Lighthouse which came into operations in 2019, has been able to aggregate about N5.2 trillion debt across 11 MDAs.

“But this is a shortfall of the debt aggregate given the 946 MDAs because the debt from  11 MDAs are not true reflection of the debt profile owed the government.

According to Tambaya, this sensitisation is aimed at encouraging all the MDAs to key into the Project Lighthouse to ensure seamless debt recovery process from their clients.

Debt-Management-Office

Nigeria’s debt hits N49trn

Abuja,  June 26, 2023: The Debt Management Office (DMO) said the total public debt stock of Nigeria as at March was N49.95 trillion (108.30 billion dollars).

According to a statement obtained from the DMO official website on Sunday, the total debt stock comprises the external and domestic debts of the Federal Government,  the 36 states and the Federal Capital Territory (FCT).

The country’s total debt for the preceding period of Dec. 21, 2022 was N46.25 trillion (103 billion dollars),  indicating an increase of about three trillion Naira.

The total debt stock,  however, excludes the Federal Government’s N22.719 trillion Ways and Means Advances of the Central Bank of Nigeria (CBN),  whose securitisation was approved by the National Assembly in May.

According to the DMO, the Ways and Means will be included in the debt stock of the Federal Government from June.

Meanwhile,  the DMO recently released the Market Access Country-Debt Sustainability Analysis (MAC-DSA) to promote transparency.

The MAC-DSA is a World Bank/IMF tool for best practices in public debt management,  which the DMO adopted and has implemented over the years.

According to the DMO,  it is an annual exercise anchored  by it, with the participation of key Federal Government agencies.

It listed such agencies to include the CBN,  Budget Office of the Federation and Office of the Accountant General of the Federation (OAGF).

Others are the National Bureau of Statistics (NBS) and the Federal Ministry of Finance,  Budget and National Planning.

According to Patience Oniha,  Director-General of the  DMO,  the recent DSA reports highlighted the need for more revenues to keep the public debt sustainable.

Oniha said that the recently released DSA report,  which was for 2022, also emphasised the need for the government to grow revenues.

She commended  some of the recent policies of the present administration as capable of  enhancing  debt  sustainability.

“Policies like the removal of subsidies to manage expenditure and the focus on revenue through the appointment of a Special Adviser to the President on Revenue were positive steps for public debt sustainability, ” Oniha said.

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