CBN attributes economic woes to poor fiscal policies, COVID 19 and others

By Akinola Ajibade

Developing countries including Nigeria and Ghana are experiencing bad economies due to factors such  as COVID 19 Pandemic, regional conflicts, resurgence of domestic health and security issues, poor fiscal management and budget deficits. public debts 

Others are rising public debts, poor foreign exchange mechanism among others.

All these, according to the Director, Monetary Policy Department, Central Bank of Nigeria (CBN), Dr Mahmud Hassan, are  impacting negatively on macro-ecomomic policies of nations and further retard the growth of their economies.

Speaking at the opening of the Regional Course on Medium-Term Budgetary Frameworks (MTBFS), organised by the West African Institute for Financial and Economic Management (WAIFEM) in Abuja, Hassan further said that the problems facing the global economy had impacted every policy area, including fiscal policy over the past two years.

According to him, countries in developing world have experienced a significant worsening in their fiscal balance and dramatic growth in their public debt, which have put them at risk of debt distress and, in some cases, even debt distress.

He said, “In the meantime, our economies are preparing for post-pandemic recovery, adjusting to externally induced inflationary pressures, and working toward achieving the United Nations Sustainable Development Goals (UN-SDG).

“However, we continue to face the challenge of revenues while the pressure for increased spending continues to build up.”

Hassan, who was represented by Dr. Yusuf Bulus, CBN Deputy Director, Monetary Policy Department, pointed out that the government budget’s significant influence on a country’s economy cannot be over-emphasised.

He  noted that several developing countries, including WAIFEM member countries have made concerted efforts over the past 15 years to reform their public financial management (PFM) systems, budget systems, and mechanisms to improve the effectiveness of public spending while preserving fiscal soundness and at least some degree of fiscal discipline and transparency.

He said, in the process, the member countries have adopted the medium-term budgetary frameworks known as the MTBFs as well as the Medium-term Expenditure Frameworks (MTEFs) in some countries.

According to him, the MTBF is a multi-year approach to budgeting that links expenditure plans to the policy objectives of the government based on a reliable estimate of available resources and with a singular focus on results over the medium term.

The approach, he said,was a significant departure from the conventional method of preparing an annual budget, which is derivstive and overlooks the future potential costs and benefits of public programmes.

Hassan, nonetheless, noted that “research conducted by the World Bank has shown that these efforts have been insufficient to meet the standards of sound practice.

“Institutional and operational weaknesses are still embedded in the budgetary systems, most of which result from capacity constraints.

Also, in his remarks, the Director-General, WAIFEM, Dr. Baba Yusuf Musa, said the course became inevitable against the backdrop of the immense macroeconomic and fiscal challenges facing member countries including Nigeria.

He said economic shocks arising from the COVID-19 pandemic, ongoing regional conflicts, and the resurgence of domestic health and security issues had complicated fiscal management by disrupting fiscal prioritisation, widening budget deficits, and sharply increasing the public debt of members, adding that, “These difficulties do not appear to be going away anytime soon.”

Represented by WAIFEM Director, Mr. Yakubu Aliyu, Musa said, while there was enormous pressure to increase discretionary and non-discretionary expenditures continuously, revenue growth was not keeping pace with even the anticipated moderate growth rates.

He said reclaiming the fiscal policy space by implementing a more strategic approach to the budgeting process through which government policies were implemented remained one way to begin addressing these challenges.