To prevent negative economic spillovers on other G24 members, the central banks of Emerging Markets and Developing Economies (EMDEs) have been asked to coordinate their inflation reactions responsibly.
The G24 claimed that despite COVID-19’s pushback decreasing, there is still no respite from the storm.
“COVID-19 is waning, but the global economic outlook has severely darkened as multiple compounding crises unfold. Global growth is slowing,” it said.
The committee made notice of the worrisome rise in poverty, hunger, water scarcity, cost of living pressures, and food and energy insecurity, which has exacerbated already-existing economic problems and heightened vulnerabilities in fragile nations.
“There will be no calm after the COVID-19 storm,” said Alvaro González Ricci, Governor of the Bank of Guatemala, and Chair of the Group of 24 countries, which gathered this week to discuss responses to the situation.
“Financial conditions are worsening. Policymakers, especially in advanced economies, have rapidly moved to curb higher than expected inflation by tightening monetary policy with sharp and repeated increases in interest rates, which bring currency depreciations and large capital outflows in emerging markets and developing economies (EMDEs),” González said.
González emphasized that the war in Ukraine exacerbates the issue of inflation by decreasing the world’s food supplies and causing energy and fertilizer shortages, which disproportionately hurt the weak and the poor while greatly increasing fiscal and economic pressures. A recession would make these problems worse on all fronts, making it more important to make sure there are enough financing resources available.
Members of the G24 highlighted their worries that international financial institutions may not be equipped to respond to the current confluence of compounding problems because they have already stretched their lending to manage COVID.
“Warning lights are flashing and we must urge proactive efforts to expand their lending resources to support a more difficult recovery,” González said
The G24 members demanded increased assistance from the IMF, the World Bank Group, and other international financial institutions to provide timely and appropriate liquidity support as well as development financing, particularly for low-income countries and fragile economies. This support should also include adequate emergency financing.
They demanded that the IMF’s 16th General Review of Quotas be finished on time in order to increase the IMF’s quota resources, which would lessen its reliance on borrowed funds and increase its capacity to lend during crises.
The G24 urged the IMF to change its surcharge policy, which they deemed to be regressive and policy-driven. They also urged the World Bank and other multilateral development banks to act quickly to better manage risks and leverage their capital while looking into ways to increase lending capacity through capital increases or other measures.
However, Emmanuel Kelvin, the Chief Executive Officer of Dairy Hills Limited, has urged the Federal Government to collaborate with the Governors’ Forum to prevent the Excess Crude Account from restricting potential revenue (ECA).
Additionally, he criticized the $73 crude oil standard, saying that given the current situation, it is unrealistic.
“How can the Federal Government continue with a benchmark price of $73, refuse to work with the Nigeria Governors Forum to eliminate the Excess Crude Account that caps the potential of revenues for Production Sharing Contract (PSC), and International Joint Venture Contract in post-PIA to raise the amount of income paid by NNPC less the Direct Sale Direct Purchase (DSDP) to the Federation Account,” he stated.
The President’s budget proposal, which he said lacks important details, has not been challenged by the National Assembly, he continued.
He emphasized the necessity of changing the exchange rate paradigm from a fixed peg to a floating system, bringing exchange rates into line, and removing the oil income ceiling by doing away with ECA.
Given that the debt to GDP ratio is currently at 24 percent, the debt servicing to government revenue ratio is currently at 120 percent, and the debt servicing has exceeded N2 trillion, he called for the Fiscal Act to be amended to increase the ratio of what the government is allowed to raise through debt.
Emmanuel added that despite the fact that all capital expenditures have been eliminated and government revenues are insufficient to cover the budget’s needs without turning to loans, the debt to GDP ratio is still below the 40% threshold set forth in the Fiscal Responsibility Act.
This demonstrates how out of touch this administration is, in his opinion, with the imminent fiscal cliff, according to him.
Emmanuel added that the Central Bank of Nigeria’s (CBN) alternatives are also limited, claiming that raising interest rates to combat inflation is just insufficient. He also criticized the CBN for using extreme measures to meet the required debt to the Federal Government.
This occurs as the Federal Government’s borrowing options continue to narrow since both international lenders and donor nations are struggling to survive as the world economy continues to experience hardship.
