Beware Of Loans From China – IMF Warns Nigeria And Other Developing Countries

Beware Of Loans From China – IMF Warns Nigeria And Other Developing Countries

The International Monetary Fund has cautioned Nigeria and other
developing countries from taking loans from China due to unfavourable
loan conditions.

The Financial Counsellor and Director of the Monetary and Capital
Markets Department of the IMF, Tobias Adrian, said this on Wednesday
during the launch of the Global Financial Stability Report for April
2019 at the IMF/World Bank meetings in Washington D.C.

“Capital flows, which includes capital flows from China, are, of
course, important for development. On the other hand, what is very
important in lending arrangements are the terms of the loans and we urge
countries to make sure that when they borrow from abroad, the terms are
favourable. In particular, we recommend that loans to countries should
conform with Paris Club arrangements and that is not always the case of
loans from China,” Adrian said.  

On Nigeria’s rising debt levels, Adrian said that the IMF was not
overly concerned, as it would allow the country to invest more in
developing critical infrastructure.

“At the moment, funding conditions in economies such as Nigeria and
other sub-Saharan African countries are very favourable but that may
change at some point,” he said. The April 2019 Global Financial
Stability Report finds that in spite of significant variability over the
past two quarters, financial conditions remained accommodative.  

As a result, financial vulnerabilities have continued to build in the
sovereign, corporate, and non bank financial sectors in several
systemically important countries, leading to elevated medium-term risks.
 Also, the IMF in the April 2019 Fiscal Monitor Report urged Nigeria to
increase Value Added Tax, increase and expand the coverage of excise
duties.

The IMF commended the country’s latest Strategic Revenue Growth
Initiative, which looks at a comprehensive approach to tax reform.