Nigeria and other developing countries with high foreign currency borrowings and external funding should prepare for possible turbulence
The warning was Issued by financial global body, the International Monetary Fund.
The IMF said this in a blog post titled ‘A Disrupted Global Recovery’ discussing its World Economic Outlook.
It will be recalled that Nigeria spent a sum of $520.78 million on external debt servicing in the third quarter of 2021
The rise in debt service is caused by growth in the country’s debt profile.
It should be noted that the country’s debt increased to $37.96 billion in the third quarter of 2021, up from $33.47 billion the previous quarter.
IMF stated that economic policies stance can affect economies like Nigeria negatively. “As the monetary policy stance tightens more broadly this year, economies will need to adapt to a global environment of higher interest rates. Emerging market and developing economies with large foreign currency borrowing and external financing needs should prepare for possible turbulence in financial markets by extending debt maturities as feasible and containing currency mismatches.”
IMF added, “In some cases, foreign exchange intervention and temporary capital flow management measures may be needed to provide a monetary policy with the space to focus on domestic conditions.”
According to IMF, 60% low-income countries that are already in or at high risk of debt distress, will find it increasingly difficult to service their debts.
It said that “the G20 Common Framework needs to be revamped to deliver more quickly on debt restructuring, and G20 creditors and private creditors should suspend debt service while the restructurings are being negotiated.”