IMF blames insurgency for hardships in Cameroon, others

The International Monetary Fund (IMF), on Tuesday, blamed the widespread suffering in Nigeria, Cameroon, South Sudan, Chad and Niger on the civil war and acts of violence perpetuated by insurgents.

The financial agency which made this known in a statement obtained by our correspondent states that the acts of terrorism in these countries are also weighing on economic activity, straining fiscal budgets and diminishing the prospects for investment.

Specifically, the IMF also said that the violence part by the general elections in Maroondi and the recent developments in the area are reminders that political cycles can also still cause turmoil.

On the newly introduced cocktail of foreign exchange restriction policies by the government of Nigeria, the statement said the exchange rate pressures in Nigeria and other oil producers had been considerable in the course of this past year because of what has happened in terms of exchange earnings as oil prices have reduced those considerably.

“In the case of Nigeria, of course, a number of other factors have been at play. Those, of course, include in the run-up to the elections this year, some uncertainty about what the possible outcome of those elections would be. Since the elections, a continued uncertainty about the policy direction that the current administration is going to take, the waiting for a cabinet, the vision and plans for pursuing the reform effort, and what can be expected from that. So it’s certainly the case that there are a number of factors that have led to pressures on the naira,” it further said.

It continued that the exchange rate being an important instrument of adjustment in countries that have a flexible exchange rate, adding that it’s been appropriate to allow the exchange rate to depreciate. “With a view to helping to contain the demand for more foreign exchange, and to help contain the level of imports that was not sustainable in light of the shock to the Nigerian economy.”

The statement reads: “How should policymakers deal with these gathering clouds. The near-term implications are three fold, we think. First on the fiscal front for the vast majority of countries in the region there’s only limited scope to counter the drag on growth. For oil exporters to sharpen seemingly durable decline in oil prices makes fiscal adjustment unavoidable and the room to smooth this adjustment is becoming increasingly limited.

“For most other countries fiscal policies need to continue to be guided by medium-term spending frameworks that balance debt sustainability considerations and addressing development needs.

Second on the monetary front wherever the terms of the trade decline has been enlarged and exchange rate is not pegged it is appropriate to allow for the exchange rate depreciation to absorb the shocks, but even countries that are not heavily reliant on commodity prices have seen their currency come under pressure. Given the strong global forces behind these pressures, they are too resisting these pressures risk losing scarce reserves.

“Accordingly intervention should be limited to contain disorderly exchange rate movement. And the monetary policy should respond only to second round effects of exchange rate depreciation and other upward shocks to inflation. Finally risks to the financial sector from the commodity price declines especially in oil-exporting countries and from exchange rate depreciation would require careful monitoring. And in the medium term efforts to diversify the economy and increase fiscal resilience remain critical”

The statement also stated that in particular strengthening revenue mobilization — that is exploiting the regions' significant untapped tax potential will be the most durable way to create fiscal space, continue to finance much needed infrastructure and other development needs and reduce reliance on public debt.

In addition, it said policy actions will need to be geared toward boosting the regions' competitiveness to nurture new sources of growth. It added that these and other topical issues will be included in the forthcoming issue of the IMF’s semi-annual regional economic outlook for sub-Saharan Africa that will be published on October 27th with launch events in Johannesburg and Dakar.

The statement pressed further that Zambia has been going through economic challenges of late. “We’ve seen our quota has depreciated sharply in the last 42 months. We’ve seen the commodity prices of copper going down and we’ve seen commodity prices of basic food which have drastically increased by almost 50 percent” it noted.

On Cameroon, the IMF said the country, as the other five member countries of the Sumac oil producers are facing a considerable shock with the decline in oil prices. It added that those prices are expected to continue to be very low for quite some time, and those countries as a whole have very deeply dug into the buffers that they had before.

“As a result, some of them are not able to pursue counter-cyclical policies as a way of trying to navigate these headwinds of the oil prices, and do need to adjust to what is possibly a permanent decline in their revenues,” it further said.