April 30, 2019 / 1:50 PM / 3 months ago

RPT-African countries hit by commodity slump must `re-calibrate' debt-IMF Africa chief

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By Alexis Akwagyiram

ABUJA, April 30 (Reuters) - African countries coping with low commodity prices must do more to re-balance investment and sustainable debt, and they should also ramp up tax collection, the International Monetary Fund’s Africa chief said.

The commodity price slump of 2015 ended a decade of rapid growth across Africa. The IMF cut its 2019 economic growth projection for sub-Saharan Africa this year to 3.5 percent, from 3.8 percent set last October, in its regional report published in early April.

The IMF said its lower forecast reflected downward revisions for Nigeria and Angola as oil prices weakened.

In the countries worst hit by the slump, the balance between investment aimed at development and sustainability had to be improved, Abebe Aemro Selassie, the IMF’s director for Africa, said during an interview on Tuesday in Nigeria’s capital, Abuja.

“What is needed for those countries now is to re-calibrate that balance,” Selassie said. “In particular, if they can mobilise more revenues, they can address one of the pinching concerns which is debt-service ratio.” He cited Chad and Congo Republic as countries with debt-sustainability issues.

“The share of resources that goes towards paying interest relative to tax revenues has been drifting upwards, so what is needed is more revenue mobilisation to try to mitigate that pressure,” he said.

Nigeria, Angola and South Africa, which make up about 60 percent of sub-Saharan Africa’s annual economic output, have all faced challenges to growth.

Nigeria, which has Africa’s biggest economy, should do more to increase domestic revenue by raising taxes to improve debt service and fund infrastructure development, Selassie said.

“Going forward, you cannot sustain these high levels of deficits,” he said. “More pressing is the fact that you have interest payments accounting for a large share of tax revenues. What is needed ... is to do more domestic revenue mobilisation.”

Nigeria has one of the lowest tax-to-GDP ratios in the world. Earlier this month, lawmakers said they had asked the government to consider raising taxes on luxury goods to boost revenues, though collection has previously been difficult in a country where many small business are not registered.

Concerns about rising debt in Zambia, alongside accusations of additional hidden borrowing and government corruption, have spooked investors and Western donors in recent months.

The IMF felt the balance between investment and sustainability also needed “re-calibration” in the copper producer, which was hit hard by the slump in commodity prices, Selassie said.

The IMF has warned repeatedly that Zambia is at risk of debt distress and in February 2018 rejected borrowing plans for a second time, putting government hopes for a $1.3 billion loan agreement on hold.

Selassie also said Mozambique’s government had informed the IMF that it was holding talks with creditors to bring debt back to a sustainable level.

Writing by Alexis Akwagyiram, editing by Larry King

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