By Emma Ujah, Abuja . Bureau Chief
Nigeria could warm to debt service relief as there is strong evidence that the World Bank Group and the International Monetary Fund (IMF) would recommend the G20, an extension of the Debt Service Suspension Initiative (DSSI) by low-income countries until the end of 2021.
Nigeria owes the two institutions about $14 billion, while the 2021 budget is expected to spend a whopping N3.12 trillion in debt service in the fiscal year.
The possible relief is in a paper presented by World Bank/IMF staff against the backdrop of the 2021 virtual spring meetings that started yesterday.
The recommendation that will provide further debt service relief under the COVID-19 pandemic initiatives requires the approval of the organizations’ boards of directors to become their official positions.
According to the paper, the recommendation has become necessary as most debtor countries struggle with the negative effects of the COVID-19 pandemic on their economies.
“As COVID-19 continues to spread globally and the economic recovery remains extremely uncertain, a further extension of the DSSI until the end of 2021 would help eligible countries meet their high financing needs and fight poverty.
“Global cases have multiplied and new, more contagious viral strains have emerged. At the same time, developing countries and vulnerable populations are at risk of lagging behind in global vaccine rollouts. Liquidity needs are expected to remain high in 2021 and the outlook for debt sustainability has deteriorated further.
“The economic outlook remains exceptionally uncertain at a time when many DSSI-eligible countries already have longstanding violations of DSA debt indicators.
The World Bank estimates that to achieve a vaccination rate to interrupt virus transmission, Africa would need about $12 billion for vaccines and additional implementation costs, nearly the same amount of official debt service as deferred by the current DSSI participant.” , the staff said. the newspaper.
According to the paper, “In some IDA countries, the interest burden has already exceeded pre-HIPC levels – and debt service burdens are highest in Sub-Saharan Africa.
Total external public and publicly guaranteed (PPG) debt-service-to-income ratios for IDA countries increased from 8.2 percent to an estimated 11.8 percent between 2017 and 2019. The situation worsened in 2020, with 54 percent of IDA countries in or at high risk of debt.” Nigeria’s ratio would be significantly above 70 percent.