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 Daily
Independent Online.
* Tuesday, June 22, 2004.
IMF advocates energy projects to quell rising oil prices
By Ntai Bagshaw
Business Reporter, Lagos
As the nation
reels under the yoke of energy crisis with increase in pump prices of
petroleum products, the International Monetary Fund (IMF) has called for
new energy initiatives to offset rising oil prices and demand over the
medium-long term.
The fund’s Managing Director, Mr. Rodrigo
Rato, at a conference on the 60th
anniversary of the Bretton Woods agreements, said the recent rise in oil
prices is related primarily to a rise in demand.
The fund had, at several fora in the
country, said that Nigeria has the potential of generating enough energy
to power the whole of Africa.
Specifically, the IMF said Nigeria can
generate over 35,000 megawatts of electricity from the gas flared away
from oil companies operations in the Niger Delta, saying this is enough to
meet the demand of sub-Saharan Africa, save South Africa, which itself
produces equivalent quantity for local consumption.
Rato had, at the conference, emphasised
the need for IMF surveillance not just on crisis-prone countries, but
also on the stability of the system as a whole. He said financial
globalisation has raised the risks of contagion, or the knock-on effects
through which one country's vulnerabilities can spread through the global
economic system.
Current trends imply that financial
globalisation will continue to intensify, with emerging markets, namely
China and India, representing an increasingly larger share of the world
economy, a trend which he recognised could pose “particular systemic
challenges.”
Moreover, while the problem of providing
large-scale financial support in a way that encourages sound economic
policies is still unresolved, he said that abandoning large-scale
financial support is “undesirable”. Rato further noted the IMF is more
likely to raise its world economic growth forecast for this year from its
current 4.6 per cent than to lower it despite higher oil prices.
The IMF boss also said the fund must be
more assertive in approving financial support, a move that could
encourage countries to implement sound policies and “avoid the need for
the fund’s support in the first place”.
Still, he said the IMF does not rule out
awarding “exceptionally” large loans to prevent risks to the global
financial system, as when it provided $21 billion to South Korea in 1997.
Rato concluded by calling for greater
clarity in IMF’s role in low-income countries, as well as better
coordination with other institutions, including the World Bank, the
United Nations (UN), regional development banks and the WTO.
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