By Okey Onyenweaku
The International Monetary Fund, IMF, has rolled out measures for emerging markets, including Nigeria and other low income economies to achieve sustainable recovery, save lives, revive growth, create jobs and reduce the impact of recession. The IMF hinted that reprioritizing spending was a sure way to enhancing its traction for recovery.
Disclosing this during its fiscal monitor policies for the recovery report emerging on Wednesday from the on-going Annual World/IMF virtual meetings, the fund noted that many Sub –Saharan African countries which rank in the low income bracket have no access to international financial markets. “These countries were facing binding constraints on their ability to put public finances and state capacity at the service of growth and development”, IMF explained.
Advising nations for the post pandemic period, the report stated, “Looking ahead, countries will need to make it a priority to invest in health care systems and education. They should also strengthen social safety nets to ensure that all people have access to food and other basic goods and services. As economies begin to recover, governments should seize this moment to move away from the pre-crisis growth model and accelerate the transition to a low-carbon and digital economy.
“As economies begin to recover, governments should seize this moment to move away from the pre-crisis growth model and accelerate the transition to a low-carbon and digital economy. Carbon pricing should be a key feature of this transition, because it encourages people to reduce energy use and shift to cleaner alternatives—and, moreover, it generates revenue that can be used in part to support the most vulnerable.”
Vitor Gaspar, Director of the Fiscal Affairs Department of the IMF also advised: “As economies tentatively reopen,but uncertainty about the course of the pandemic remains, governments should ensure that fiscal support is not withdrawn too rapidly. However, it should become more selective and avoid standing in the way of necessary sectoral re-allocations as activity resumes. Support should shift gradually from protecting old jobs to getting people back to work for example, by reducing job retention programs (wage subsidies), reintroducing job search requirements, and training new skills and helping viable but still-vulnerable firms safely reopen. With low interest rates and high unemployment, boosting public investment—starting with maintenance and ramping up projects—can create jobs and spur economic growth.”
Gaspar emphasized that “emerging market and low-income economies facing tight financing constraints will need to deliver more with less, by reprioritizing spending and enhancing its efficiency.”
“Some may need further official financial support and debt relief. Governments should also adopt measures to improve tax compliance and consider higher taxes for the more affluent groups and highly profitable firms. The ensuing revenues would help pay for critical services, such as health and social safety nets, during a crisis that has disproportionately hurt the poorer segments of society.”
The report further explained that once the pandemic came under control, governments would need to foster the recovery while addressing the legacies of the crisis including the large fiscal deficits and high public debt levels.
“Countries with fiscal space and major scar from the crisis, such as large long-term unemployment, should provide temporary fiscal stimulus while planning for an adjustment over the medium term.
Countries with high debt levels and less access to financing will also need to adjust over the medium term, striving to protect public investment and transfers to lower-income households”.