The World Bank Group and the International Monetary Fund (IMF) have warned Nigeria, South Africa and other low-income nations to be careful with activities of the International Financial Institutions (IFIs) such as the African Development Bank (AfDB), Asian Development Bank, the European Bank for Reconstruction and Development and others because these international lenders are adding to their heavy debt profiles.
Speaking at at a World Bank-IMF Debt Forum on Monday in Washington DC, president of the World Bank, Mr David Malpass, noted that these development banks and IFIs were further worsening already-challenging debt situations.
“We have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official export credit agencies, have a tendency to lend too quickly and to add to the debt problem of the countries,” Mr Malpass said.
He said, “In Pakistan, the Asian Development Bank is pushing billions of dollars into a fiscally challenging situation.
“In the case of Africa, the African Development Bank is pushing large amounts of money into Nigeria, South Africa and others without the strongest program to sustain it and push it forward.
“In Kazakhstan, the EBRD is pushing forward with loans where lots of work is put in by other institutions and then the lower interest-rate investment is made.
“And so, we have a very real problem of the IFIs themselves adding to the debt burden. And there’s pressure then, I think, on IMF to sort through it and look at the best interest for the country.”
Recall that according to the latest figures by the Debt Management Office (DMO), as at September 2019, the total debt profile of Nigeria stood at N26.2 trillion, with Total External Debt at N8.3 trillion while the Total Domestic Debt was at N17.9 trillion.
To remedy this, the World Bank, through its fund for the poorest countries, the International Development Association, said it would be implementing a new set of lending rules on July 1, 2020 as it unlocks a new round of funding expected to make some $85 billion in loans and grants available.
According to Mr Malpass, these are aimed at setting new standards for transparency and require coordination with other multilateral lenders working with the same country.
During the event, the IMF Managing Director, Ms Kristalina Georgieva, warned that the interest cost derived by high volume of debt may take away precious resources from people in low-income countries like Nigeria.
“Why I worry so much about debt in low-income countries, because what it means is that if it is not proper managed, interest rates, often high, takes away precious resources from education and health and infrastructure investments,” she said.
The IMF and World Bank are both worried that lack of transparency could make the debt risk a bigger problem in the world.
