Madame Christine Lagarde, Managing Director, International Monetary Fund (IMF),` at an interactive session with international journalists during the Spring Meetings of the World Bank and IMF in Washington D.C. speaks on global and country level macroeconomic updates, with specific focus on how the clouds on the horizon can actually be addressed effectively and positively at home through sustainable economic projections, critical reforms, as well as international cooperation at the international levels. Excerpts.
What is your take on the role politics is playing in increasing global policy uncertainties. Also, could you comment on China’s recent stimulus measures?
I try to look at the half full glass, not the half empty. And what should give us hope and what should renew our energy is the fact that many of the risks that I have mentioned, many of the clouds on the horizon can actually be addressed effectively and positively precisely by politics at home and by international cooperation at the international levels. So, it is a question of what people want in order to fix some of those issues.
So, I am more concerned about making sure that the facts, the numbers, the interconnection between policies and consequences are actually properly documented and evidenced.
On the Chinese stimulus, as you know our forecast for growth is 6.3 this year, 6.1 next year, a regular anticipated slight moderation year after year, as we have observed it. The recent stimulus that was decided by the Chinese authorities has actually, as it is, as it stands, has been welcomed. And we thought that it was the right approach under the circumstances.
Do you think financial markets are now complacent?
Well, we see the financial markets as having taken a lot of energy out of the change of monetary policy as broadcasted in a clear communication and on the basis of data. From that change of monetary policy and probably pricing in as well a few of those man-made solutions that we all hope for, including ( possibly on the trade tension front.
In your recent staff Article IV consultation report on Nigeria, one of the recommendations was that the fuel subsidy should be removed. For us, it is a very sensitive issue because we think that at the present rate, the subsidy – made the price too high. So, why would you recommend removal of the subsidy from the oil price?
For various reasons and as a general principle we believe that removing fossil fuel subsidies is the right way to go. If you look at our numbers from 2015, it is no less than about 5.2 trillion dollars that are spent on fuel subsidies and the consequences thereof. And the Fiscal Affairs Department has actually identified how much would have been saved fiscally but also in terms of human life if there had been the right price on carbon emission as of 2015. Numbers are quite staggering.
If that was to happen, then there would be more public spending available to build hospitals, to build roads, to build schools, and to support education and health for the people.
Now, how this is done is the more complicated path because there has to be a social protection safety net that is in place so that the most exposed in the population do not take the brunt of those removal of subsidies principle. So that is the position we take.
I would add as a footnote as far as Nigeria is concerned that, with the low revenue mobilisation that exists in the country in terms of tax to GDP, Nigeria is amongst the lowest. A real effort has to be done in order to maintain a good public finance situation for the country.
Are you concerned that lending by China can create an actual debt crisis in Africa and other resource-rich countries.?
Could you give a little guidance on what exactly you are looking to change or strengthen reform of surveillance with regard to currency policy and foreign exchange rates?.
On the debt issue, as you probably know, both the Bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there. And this is an endeavor that we will pursue together and which the G20 has actually asked us to develop. So we are doing that.
Besides, we are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles that have been approved by the G20 and that we have endorsed internally and developed ourselves. It is clear that ( any debt restructuring programmes going forward in the years to come will be more complicated than debt restructuring programs that were conducted 10 years ago simply because of the multiplicity of lenders and the fact that not all public debt is offered by members of the Paris Club, for instance, which does not mean to say that any debt from a lender outside the Paris Club is an issue as long as the principals, principles are adhered to. There is also a myriad of nonpublic lenders that complicates the matter seriously.
The comprehensive surveillance that we have identified is a combination of two things. It is, one, trying to harness all the competencies that we have, focusing on delivery of services for a country. To give you an example, when we do an Article IV, which is clearly the typical bilateral surveillance product that we have with countries, we are determined to organise us in such a way that we bring together the country teams, the fiscal competencies, the market and monetary policy competencies but also the capacity development programs that will be needed and helpful in order to deliver on the policy recommendations that we discussed with the authorities.
So, it is sort of bringing in harnessing all the resources of the institution together on delivery of services for the country. It is also leveraging on knowledge management, on data analytical work that will be better leveraged by the technologies that we are currently assessing and, for some of them already implementing. So, hopefully we will have speedier delivery, more online services, if you will, to use, you know, sort of a common analogy, and being altogether as an institution on those services.
Well, currency, we constantly improves our external sector report. We will continue doing so. And that is going to be part of the work that we continuously develop. You know that we have moved from one particular model to another and under the leadership of David Lipton, it is work that is constantly under review and probably the best that is available in that respect at the moment because it is a comprehensive system.
Source: www.independent.ng
