IMF Warns Against Spending Oil Windfall
From Chris Nwachuku and Juliana Taiwo in Ouagadougou
The International Monetary Fund (IMF) yesterday cautioned Nigeria and other oil producing countries in Africa against spending the excess revenue derived from the high cost of oil prices in the international market
The Fund said a culture of saving of such excess is necessary to ensure fiscal and debt sustainability.
Addressing African leaders at the African Union Extraordinary summit of Heads of State and Government in Ouagadougou, capital of Burkina Faso, IMF Managing Director, Rodirogo De Rato, said much of the rich resources of African countries had been wasted by poor policies.
"Let me elaborate on these points for those countries rich in natural resources where the blessing of mineral wealth has been undermined by poor policies. A key priority for them is to avoid boom-bust cycles as oil prices rise and fall. This will require that much of the revenue windfall from prices be saved and incorporated into a medium term fiscal framework aimed at achieving fiscal and debt sustainability," said Rato.
Nigeria has made over N300 billion from excess crude sales. This followed crude oil selling for over $40 per barrel when the 2004 budget was based on $25 per barrel.
The issue of what to do with the excess crude fund had generated intense debates between the Federal Government and the state governors. While the Federal Government insisted that the crude gain should be saved in a special account with the Central Bank of Nigeria (CBN), the governors said they needed funds for development purposes.
Speaking on the issues, Rato noted that the challenge before African countries is to find ways to build on the foundation of macro-economic stability: to build a future with more growth, employment and higher living standards and less poverty and deprivation. He said this could only be achieved through the dismantling of trade distorting subsidies and improvement of access to African markets. He added that trade barriers among African countries are too high for any meaningful trade integration.
The Managing Director disclosed that IMF is currently assessing operations in member countries with low income and that where the instruments deplored in such states are inadequate, new approaches will be considered to achieve the shared objectives of growth and poverty reduction in the continent.
He said IMF has taken steps to assist countries facing prospective trade shocks resulting from liberalisation under the Doha Round. Besides he stated that work is on among the IMF, multinational and bilateral creditors to assess the state of the debt relief under the highly indebted poor countries initiative. Rato noted that the whole objective is to ensure debt relief or avoid a further build up of the unsustainable debt in the future for the countries.
He disclosed three particular areas of priority for IMF in the continent. These are to make the fund financial assistance more flexible and responsive, sharpen its role in countries that need financial help through timely and high quality advice, technical assistance and capacity building.
IMF also planned to reinforce its anaylsis and assistance in support of Africa's regional integration initiatives by providing important peer review mechanism, play valuable role in promoting sound macro-economic policies and good investment.
Meanwhile, the Heads of State yesterday adopted the political document of the summit itself.
The AU Commissioner of Social Affairs Bience Gawanas also disclosed that the Summit ended with the launch of the Nelson Mandela Foundation for Knowledge building and the advancement of science and technology in Africa. She said the foundation when established will be an African institute that will support employment creation through economic diversification and industrial development.
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