IMF Advises The Federal Government to Discard Expending on Fuel Subsidy
— The International Monetary Fund (IMF) has strongly advised Nigerian government to discard expending on fuel subsidy and instead divert the money to other important sectors of the country.
The Managing Director of the International Monetary Fund (IMF), Mrs. Christine Lagarde, on Thursday in a press briefing advised the federal government to discard expending on fuel subsidy and rather divert the money to other important areas such as health, education and infrastructural development.
Mrs Lagarde made this know during a press briefing at the Global Policy Agenda at the ongoing World Bank Spring Meeting in Washington DC. According to her, expending on fuel subsidy is only causing poor development in other critical areas of capital development, including health, education and infrastructure, hence the need for the government to refocus.
Lagarde also mentioned that it was the International Monetary Fund’s tenet to discourage fossil fuel subsidies because of its consequences on other important sectors of the country, as well as the environment at large.
In her words: “As far as Nigeria is concerned, with the low revenue mobilisation that exists in the country; in terms of tax to GDP, Nigeria is amongst the lowest. A real effort has to be done in order to maintain a good public finance situation for the country and in order to direct investment towards health, education, and infrastructural development.
“If you look at our numbers from 2015, it is no less than about $5.2 trillion that are spent on fuel subsidies and the consequences thereof. And the Fiscal Affairs Department has actually identified how much would have been saved fiscally but also in terms of human life, if there had been the right price on carbon emission as of 2015. Numbers are quite staggering.
“If that was to happen, then there would be more public spending available to build hospitals, to build roads, to build schools, and to support education and health for the people.
“Now, how this is done is the more complicated path because there has to be a social protection safety net that is in place so that the most exposed in the population do not take the brunt of those removal of subsidies principle. So that is our position,” she mentioned.
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The IMF boss also spoke about the role of the organization in global policy agenda, “the global economy has entered a delicate phase. Growth is slowing, reflecting trade and geopolitical tensions, policy uncertainty, and one-off factors.”
She also strongly recommended the strengthening of domestic policies so as to enhance resilience and promote inclusion of all.
“Fiscal policy should strike the right chord between supporting demand, ensuring debt sustainability, and safeguarding social objectives, including by upgrading tax systems, mobilising domestic revenue, priortising expenditure and reducing public debt where needed.
“Monetary policy should ensure that inflation remains on track towards target and focus on anchoring expectations where inflationary pressures persist. Financial resilience must be enhanced, including by continuing to buttress micro-prudential supervision and strengthen micro-prudential frameworks that manage risk.”