ABUJA— MANAGING Director of the International Monetary Fund (IMF), Mr. Rodrigo de Rato, who is beginning a visit to Nigeria today has warned the Federal Government against the temptation of indulging in extra budgetary expenditure arising from the current windfall from crude oil sales.
Mr. de Rato also spoke of an agenda for the Federal Government in the drawing up of the 2005 budget, saying it should be crafted in such a way as to consolidate the gains so far achieved from the economic reforms introduced in fiscal 2004. The budget, he said, should also adopt a medium-term expenditure framework capable of curtailing the rising inflationary trends.
Speaking in an interactive video teleconference with journalists in Washington D C, Abuja, Kampala, and Libreville, Mr. de Rato said with the extra revenue being raised from the sale of crude oil at the international market, extra budgetary expenditure could worsen the nation’s inflation. Inflation rate in the country at the moment is about 19.5 per cent.
“At the moment, Nigeria, like the other oil producing countries is benefitting from high price of oil that is evolving upward in recent days. In that respect, we have advised Nigerian authorities to avoid any expenditure at variance with the projection of the budget as not to increase inflationary pressure. In that respect, we think that the opportunity for oil producing countries with increasing revenue should be in areas the budgets are constrained. And that is our main projection regarding the budget in Nigeria,” he counselled.
Mr. de Rato said it was important for the Federal Government to continue its reform programme with a greater vigour with a view to realising the full benefits of the fiscal, monetary and other economic reforms, as well as those of the civil service.
His words: “We believe that 2005 budget will be a very good moment consolidating the reforms and to adopt a medium-term expenditure framework, as to provide the Nigeria budgetary authority with modern framework to work in reduction of inflationary pressure. All that will come with a demanding total reform agenda focusing on issues like governance, civil service reform, goal in the non-oil sector and also important reform in the financial sector.”
The IMF boss said his plan for the African continent was to collaborate with national governments to achieve macro-economic stability in the world’s poorest region and a vigorous pursuit of the Highly Indebted Poor Countries (HIPC) initiative to reduce the external debt burden of African countries.
Said he: “My agenda for the African continent will be in the framework of macro-economic stability. We certainly provide programmes and assistance to countries and we have already seen experience that macro-economic stability is the pre-requisite for sustainability.
“The way that the African economies start attracting foreign investment and being more able to shoulder the problems that face their future is certainly, one very strong tool to reduce poverty is economic growth. The IMF is also related to the HIPC initiative that is being applied to many countries in Africa at the moment. That is going to be able to relinquish $50 billion of debt that will disappear in financial terms for the countries that are able to meet the condition of HIPC.
“That is one of the core business too with African countries. We have also an important programme to the reduction of poverty. We assist government technically on international issues and also trade issues, budgeting issues. So, we have a broad programme of collaboration with African governments that is aimed at providing economic framework to address macro-economic instability and be able to entrench the possibility of sustained growth and also move from a period of not getting international attention from the point of view of private investment to the point where private investment will become more and more reality in Africa,” he said.
The IMF boss also called on the European Union and the United States to resolve all outstanding issues that generated controversy among members of the World Trade Organisation (WTO), as according to him, a world trade devoid of acrimony would enhance the development of world economic growth.
His visit to Africa which commences today, he said, would provide him an opportunity to meet Heads of Government, business communities and civil societies would aid him in new policy decisions that would boost the cooperation between the organisation and African countries. The MD said his visit to Nigeria was crucial, bearing in mind the important position the country occupied in the continent both in terms of size and economy.
“Nigeria is one of the most important countries in Africa, population and also economic size. We have a long history of relationship with the Nigerian government. Right now, Nigerian government has put in a very important package of reforms and as for the IMF, a wide collaboration and monitoring those reforms. And it’s the most important non-financial programmer we are going to be doing with any country. So in that respect, I have enough reason for coming to Nigeria,” he added.
