IMF urges Africa to re-calibrate debts

African countries coping with low commodity prices must do more to re-balance investment and sustainable debt, and they should also ramp up tax collection, the International Monetary Fund’s Africa chief said.

The commodity price slump of 2015 ended a decade of rapid growth across Africa. The IMF cut its 2019 economic growth projection for sub-Saharan Africa this year to 3.5 per cent, from 3.8 per cent set last October, in its regional report published in early April.

The IMF said its lower forecast reflected downward revisions for Nigeria and Angola as oil prices weakened. In the countries worst hit by the slump, the balance between investment aimed at development and sustainability had to be improved, Abebe Aemro Selassie, the IMF’s director for Africa, said during an interview on Tuesday in Nigeria’s capital, Abuja.

“What is needed for those countries now is to re-calibrate that balance,” Selassie said.

“In particular, if they can mobilise more revenues, they can address one of the pinching concerns which is debt-service ratio.” He cited Chad and Congo as nations with debt-sustainability issues. “The share of resources that goes towards paying interest relative to tax revenues has been drifting upwards, so what is needed is more revenue mobilisation to try to mitigate that pressure,” he said.

Nigeria, Angola and South Africa, which make up about 60 percent of sub-Saharan Africa’s annual economic output, have all faced challenges to growth.

Nigeria, Africa’s biggest economy, should do more to up domestic revenue by raising taxes to improve debt service and fund infrastructure development, Selassie said.

“Going forward, you cannot sustain these high levels of deficits,” he said. “More pressing is the fact that you have interest payments accounting for a large share of tax revenues. What is needed... to do is more domestic revenue mobilisation.”