Okey Onyenweaku, Washington D.C, USA
Managing Director, International Monetary Fund, IMF, Christine Lagarde yesterday listed what Nigeria and Nigerians could have benefited from spending the sum of $5.2trillion on more important developmental projects than wasting such huge sum on meaningless fuel subsidy in the last four years.
The world Bank chief, however, advised the nation to speedily take the bold decision of developing its decaying infrastructure to improve the lives of its burgeoning population.
Speaking to the press at the ongoing World Bank/ IMF spring meetings in Washington D.C, Ms Lagarde insisted that the freed resources would also provide other social services and allow the country to breathe better.
Responding to questions on Nigeria’s fuel subsidy removal she said “I will give you the general principle. For various reasons and as a general principle we believe that removing fossil fuel subsidies is the right way to go. 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 the position we take. I would add as a footnote as far as Nigeria is concerned that, 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 infrastructure”.
According to her “the global economy is also currently quite uncertain. As I said a year ago, we were talking about synchronised growth. And 75 percent of the global economy was going through that phase. As you heard a couple of days ago, we are now talking about a synchronised slowdown by 70 percent of the global economy. So our forecast for growth this year is 3.3 per cent, going back up we hope in 2020, based on our forecast, to 3.6 per cent. But we contend that we are at a delicate moment. And this expected rebound from 3.3 per cent in 2019 to 3.6 per cent in 2020 is precarious and subject to downside risks, ranging from unresolved trade tensions, yet high debt in some sectors and countries, both public and corporate. To the risk of weaker‑than‑expected growth in some stressed economies. And, of course, the consequences of whatever Brexit will be. So, in terms of policy recommendations, what can be done about this moment of uncertainty and precarious possible pickup?
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“I would suggest not a single policy but multiple policies because it will have to be country‑specific, and there is no one‑size‑fits‑all. But we certainly would recommend two key principles. One is, do no harm. Second, do the right thing. So do no harm. The key is to avoid the wrong policies, and this is especially the case for trade. We know that for many decades, trade integration has helped boost productivity, innovation, growth, employment, and has reduced cost of living, particularly for the low‑income people. At the same time, we know that the engine of growth needs to be fixed. We need to better address dislocations caused by trade and by technological innovation, however intertwined they are we need to do more for those who are left behind. We need to better address unfair trade practices and distortions in the system, including through a WTO system reform. And we need to avoid self‑inflicted wounds, including tariffs and other barriers. So that was for the do no harm.
“Do the right thing. I would mention a few. First of all, when I said a year ago the sun is shining, fix the room. Well, fix the roof is still needed. And there are still many reforms that are outstanding and should be the focus of policymakers because it would help boost potential output to prevent disappointing long‑term growth in advanced economies and it would help developing countries catch up with their wealthier peers. Which is a process that we see slowing down at the moment. Second, create more room in order to resist the next crisis when the downturn comes and that means enhancing resilience by making smarter use of fiscal policy and by strengthening financial sector policies and discipline. So, third one. So fix the roof, create more space for when the next downturn comes up. And tackle issues that have a high potential to boost not only revenue but also growth and inclusion. And such issues have been the focus of particular chapters in our publications in the last couple of days. They include reforming the international taxation system ‑‑ in particular, corporate taxation, which is the focus of our publication ‑‑ strengthening competition framework, and, above all ‑‑ and this is going to be a lot of work in the months to come for us ‑‑ fight corruption at both ends, supply and demand.
“And in all of these efforts, we need stronger international cooperation. We need those policymakers that I would call the women and the men for all seasons in order to resist that uncertainty that we have at the moment. And in order to quote Shakespeare now, in order to deal with the uncertain glory of this April day. So with that, you have seen our Global Policy Agenda for 2019. And this is what I would like to finish with. If you look at it carefully, it is much longer than what we normally do in the spring. In the spring we do a GPA update, a Global Policy Agenda update and the longer version of it is at the Annual Meetings. This one is longer because we tried to focus on the various layers of what I have called this new multilateralism that we are calling for, which has domestic implications, cross‑border implications, and an international cooperation imperative, with a strong focus on the people.
“You will see that we are going to look at many of our policies, our guidelines, our methods, our operations in order to provide in the next decade the best possible services for the membership. We are looking at our Debt Sustainability Analysis. We are looking at our conditionalities. We are looking at improving our low‑income country facilities. We are looking at a more comprehensive surveillance so that we can harness the benefits of technologies, best practices in all countries around the world, in order to provide the services that are expected by the membership. Those are only some examples of the major work that we are anticipating in the months to come and it is an investment that will deliver fruit in the next many years.”