Washington, April 20: The World Bank has warned Nigeria and other African nations against excessive debts said, "What is good for Nigeria is that debt to the GDP ratio is still low but the debt to revenue ratio is already high”. The bank even asked to maintain the balance between massive spending for development and moderation in borrowing.Albert Zeufack, Chief Economist for African Region spoke on the latest update on the continent's economy via webcast from the bank's headquarters in Washington DC, USA on Wednesday.
According to him the environment of weak economic growth comes at a time when the continent is in dire need of necessary reforms to boost investment and tackle poverty. Countries also have to undertake much-needed development spending while avoiding increasing debt to unsustainable levels.
Adding to his point, he said,"Fiscal restructuring is going to be challenging and the government has to be careful in order to balance efforts to develop the country with a moderation in borrowing".
The Chief Economist admitted that the liberalisation of the exchange rate, being advocated by some international organizations could create inflationary pressures but that with tightening of monetary policies inflation would reduce.
Zeufack is worried about the need for continuous investments in the nation's infrastructure and those of other African countries, noting the existing of very wide gaps. He said that It is important that they continue to invest and investment is possible to crowd in private sector if countries create the right regulatory environment.
Zeufack said that having the immense investment in the region, more jobs would be created and would enhance intra-regional trade which in turn would result in accelerating the growth of the economies of African countries.
The Chief Economist said, "The region is showing signs of recovery, and regional growth is projected to reach 2.6% in 2017. However, the recovery remains weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty". He said that after registering the worst decline in more than two decades in 2016 where economic growth in Sub-Saharan Africa is rebounding and would hit a 2.6% growth rate this year and described it as a weak growth.
Zeufack explained that the per capita income growth remained negative because the growth does not keep pace with the population growth rate.
The World Bank has said Nigeria, South Africa and Angola remained the largest economies on the continent even though impressive growth in seven countries across Africa.
Punam Chuhan, World Bank Lead Economist and the author of the report Africa's Pulse, said "With poverty rates still high, regaining the growth momentum is imperative. Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness".
The International Monetary Fund (IMF) said that 66% of Nigeria's tax revenues is spent on servicing debts calling on the country to raise taxes.
Vitor Gaspar, director of the fund's Fiscal Affairs department while speaking at the IMF Fiscal Monitor briefing in Washington on Wednesday, said that he was happy the Nigerian government now sees taxation as a path to development.
Adding his excitement, Vitor Gaspar said, "I had the privilege of visiting Nigeria some months ago and I was very happy to understand that for the authorities in Nigeria, fiscal policies in general and tax policy, in particular, are part of the strategy for development" and "That is precisely how I believe fiscal policy should be thought in developing countries as part of the development strategy".
According to Catherine Patillo, Assistant Director and Chief of Fiscal Policy and Surveillance Division of the IMF, Nigeria needs strong fiscal consolidation and improved taxation, stating that revenue-to-interest ratio is on the increase.