African nations should consider cutting fuel sub-sidies and oil exporters must curb spending as a slump in crude prices takes its toll on government revenue, International Monetary Fund (IMF) Manging Director Christine Lagarde has said.
An almost 60 per cent drop in oil prices since June has forced policy makers in Nigeria, Africa’s biggest crude producer, to devalue the currency, raise interest rates to a record and consider shaving the 2015 budget by 8 per cent.
Subsidising countries “should think about reducing and phasing out the oil subsidies, taking advantage of the oil price and using public finance more wisely than in undifferentiated energy subsidies,” Lagarde said in an interview with Bloomberg.
“For the exporting countries that are clearly taking a hit on both accounts of reduced trade revenues and reduced public revenues, they have to be very cautious with public spending, and reduce what can be reduced and use whatever is left over as buffers,” she said.
The IMF last week lowered its 2015 economic growth outlook for sub-Saharan Africa to 4.9 per cent from a previous estimate of 5.8 per cent in October, citing “shocks” to oil-producing economies from falling prices.
Negotiations with Ghana over a loan programme are continuing in order to resolve “a few issues” before a proposal can be submitted to the IMF board for approval, said Ms. Lagarde.
Ghana is seeking as much as $1 billion in aid from the lender to help ease a crisis sparked by depreciation in the currency and soaring public debt.
The government expects to enter the loan programme by the end of February, according to Deputy Finance Minister Cassiel Ato Forson.
In the Ebola-stricken nations of Liberia, Sierra Leone and Guinea, the IMF will probably propose additional support valued at $130 million, along with considering debt relief through, at least in part, “re-purposed funding,” she said.
The viral illness killed at least 8,785 people in the three West African countries since an outbreak began in Guinea in December 2013, according to the Centers for Disease Control and Prevention.
A precautionary credit line for Kenya, East Africa’s largest economy, will probably be concluded by next month, said Ms. Lagarde.
The IMF said in November it had reached a preliminary agreement with Kenya for a $750-million standby loan to help protect the economy against possible market shocks.
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