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IMF requests more changes as it approves release of $820 million to Egypt

Published

2 months ago

July 30, 2024

The International Monetary Fund (IMF) has announced that it has finished a review and that Egypt may now take out $820 million. It added that efforts to bring macroeconomic stability back were beginning to bear fruit but called for further progress in reining in state-owned businesses.

This assessment is the third conducted as part of Egypt’s most recent 46-month IMF loan term, which was approved in 2022 and increased to $8 billion this year in response to an economic crisis characterized by severe shortages of foreign currency and soaring inflation.

The IMF stated on Monday that Egypt’s switch to a flexible currency rate regime is still “a cornerstone of the authorities’ program.” Egypt claims to have made this change.

“Inflationary pressures are gradually abating, foreign exchange shortages have been eliminated, and fiscal targets (including related to spending by large infrastructure projects) were met,” an IMF statement said.

“While there has been progress on some critical structural reforms, greater efforts are needed to implement the State Ownership Policy (SOP),” it added.

The Fund urged Egypt to expedite its plan to sell off state-owned businesses and implement changes to stop them from engaging in unfair business practices.

It further stated that Egypt needed to control the budgetary risks associated with the energy sector since daily power outages have been caused by declining natural gas production since last year.

“Restoring energy prices to their cost recovery levels, including retail fuel prices by December 2025, is essential to supporting the smooth provision of energy to the population and reducing imbalances in the sector,” the IMF quoted its Deputy Managing Director Antoinette M. Sayeh as saying.

Egypt increased the price of domestic fuel by as much as 15% in advance of the IMF assessment, which was rescheduled from July 10.

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Nigeria’s central bank issues fresh guidelines for ‘Ways and Means’ to govt

Published

1 day ago

September 18, 2024

Ifeoluwa Dada

The Central Bank of Nigeria (CBN) has issued new guidelines on Ways and Means which limit Ways and Means Advances to the federal government to 5% of the previous year’s revenue collection.

The apex bank made the position known in its fiscal year 2024-2025 monetary, credit, international trade, and exchange policy guidelines.

“Ways and Means Advances shall continue to be available to the Federal Government to finance deficits in its budgetary operations to a maximum of 5.0 per cent of the previous year’s actual collected revenue. Such advances shall be liquidated as soon as possible and shall in any event be repayable at the end of the year in which it was granted,” it said.

The Treasury Single Consideration (TSA) system requires these advances to take into consideration Ministries, Departments, and Agencies (MDAs) sub-accounts, which are linked to the Consolidated Revenue Fund.

The federal government’s consolidated cash situation will be more precisely reported, improving public financial management openness and resource availability. The CBN also stated that Ways and Means Advances must be repaid by the end of the fiscal year they were awarded, encouraging short-term borrowing.

In the Nigerian context, “ways and means” refers to the Federal Government’s ability to borrow money from the Central Bank of Nigeria (CBN). This means that the government may use “ways and means” to meet short-term needs or emergencies, which is why the CBN is referred to as the “lender of last resort.”

Over the past seven years, the facility had grown 2,900% to an extraordinary N23.7 trillion by 2023. This fast surge, which exceeded legal restrictions, increased inflation and Nigeria’s debt.

The CBN Act allows the bank to grant temporary advances to the federal government for budget revenue deficits at a rate deemed appropriate, but the total amount of such advances “shall not at any time exceed 5% of the previous year’s actual revenue of the Federal Government.”

In addition, it stipulates that “All advances shall be repaid as soon as possible and shall, in any event, be repayable by the end of the Federal Government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”

The Senate and House recently enacted a bill to increase the CBN’s federal Ways and Means borrowing ceiling. The upper chamber of Nigeria’s legislature boosted the central bank’s loan capacity to the federal government from 5% to 10% of annual income.

Yemi Cardoso, CBN governor, announced earlier this year that the bank would stop making Ways and Means advances to the federal government until existing loans were returned. He said this is one of the bank’s key strategies to handle the country’s economic issues.

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Kenya, IMF discuss economic and fiscal issues

Published

1 day ago

September 18, 2024

Ifeoluwa Dada

The International Monetary Fund (IMF) said on Tuesday that it had had productive discussions with Kenya’s government on its economic and fiscal goals after widespread protests prompted it to shelve tax rises.

In June, President William Ruto abandoned this year’s finance bill, leaving the deeply indebted government with a larger budget deficit, unpaid payments, and a delay in IMF funding.

“We remain fully committed to supporting the authorities in their efforts to identify a set of policies that could support the completion of the reviews under the ongoing program as soon as feasible,” the IMF said in a statement.

Kenya signed a four-year IMF loan in 2021 and another for climate change measures in May 2023, totalling $3.6 billion. The country secured a staff-level agreement with the IMF on its seventh review in June, but the protest and finance bill withdrawal delayed the executive board’s sign-off and payout.

Public debt helps development. Governments utilise it to fund spending, protect and invest in their citizens, and improve their futures. However, too quick governmental debt growth can be a burden. The developing world which Africa forms core is experiencing this.

Kenya’s government debt was 70.10% of GDP in 2023. Kenya’s government debt to GDP averaged 56.36% from 1998 to 2023, peaking at 78.30% in 2000 and falling to 38.20% in 2012.