Govt to IMF: our strategy ’ll mitigate debt service risk

    The Federal Government has told the International Monetary Fund (IMF) and other  partners that its revenue and debt management strategy will mitigate Nigeria’s debt service risk and fast-track her development.

   As a measure of its confidence, the Federal Government says its recent decision to refinance some of the last administration’s debts will see the country save N91.65 billion per annum. Finance Minister Mrs. Kemi Adeosun expressed this confidence when she received some of Nigeria’s international development partners, including the International Monetary Fund (IMF), in Abuja. Mrs. Adeosun said: ”The proposed refinancing of US$3 billion worth of short terms Treasury Bills into longer tenured international debt is expected to save N91.65 billion per annum”. The new debt refinancing initiative, she explained, will lead to significant benefits, particularly reduction in costs of funds.

  “Other benefits of our revenue and debt management strategy include: improvement in foreign reserves as well as reduced domestic debt demand, which will reduce crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates,” the minister said. The government’s strategy, she said, “would achieve a number of objectives that include: mobilising revenue whilst reducing the debt burden by lengthening the maturity profile, increasing foreign exchange reserves, reducing crowding-out of the private sector, and creating savings in debt service cost.”

  The minister noted that a key element of the economic reform strategy was the mobilisation of revenue to improve the debt service to revenue ratio, which is being undertaken through a number of initiatives, including the plugging of leakages and the deployment of technology for revenue management. She specifically cited Health Pay, a pilot cashless revenue project in the health sector, which recorded material increases in revenue, the ongoing Voluntary Assets and Income Declaration Scheme (VAIDS), which is expected to impact positively  on the volume of tax collections.

According to Mrs. Adeosun, “the difference in our economic strategy is that we are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue”.

  This, she said: “is a long term strategic reform which is critical to our future economic growth and in the short term will enable our debt service to revenue ratio to improve”. The government, according to her, “does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plan (ERGP) reforms progresses over the medium term, such that the naira is expected to strengthen”.

   Specifically, the benefits of the government’s revenue and debt management strategy will result in: Savings in Debt Service Cost amounting to N76.375 billion per annum from US$2.5bn borrowing and N91.65 per annum from US$3 billion refinancing of short-term domestic debt”. The government anticipates a boost in foreign reserves with increased dollar inflow; Reduced Debt Burden and Rollover Risk because of lengthening of maturity profile and the  creation of space for borrowing by the private sector as a result of the crowding-out of the private sector.