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IMF: Policy uncertainty put-off FDIs

By Benjamin Umuteme

Abuja-

International Monetary Fund (IMF) has said that political uncertainty resulting in a lack of clarity about future direction of economic policy is a drawback to attracting Foreign Direct Investment (FDI) in Nigeria.

According to the Fund in a paper titled: “Sub-Saharan Africa; The Path to Recovery”, it is weighing on consumer and investor confidence. In spite of these, the global financial institution noted that the policy environment has started to improve even as fiscal deficits are stabilizing and current account deficits are narrowing, partly reflecting a slight rebound in commodity prices.

The Bretton Wood institution also noted that vulnerabilities continued to increase in the region notably, due to rising public debt, inancial sector strains and low external buffers.

“Driving this increase in debt is a combination of large fiscal deficits, a slowdown in growth, and in some countries, exchange rate depreciations. Increasingly, deficits are being financed by domestic banks and ultimately constraining the availability of credit to the private sector. In many countries, banks’ liquidity and solvency indicators have deteriorated, and non-performing loans have increased,” the paper noted.

To address this trend, the paper insisted that fiscal adjustments is needed by many sun Saharan African countries to increase in debt, noting that with growth momentum weak, it is important that wherever possible fiscal adjustment is undertaken in a manner that limits the adverse effect on growth, while preserving fiscal space for priority spending.

In order to boost growth, IMF called on African countries to adopt strategies that would promote economic diversification and build on existing strengths and work best to tackle specific challenges.

Sectoral policies are likely be more successful if supported by efforts to enhance macroeconomic stability, improve education

outcomes, bolster governance and transparency in regulation, and

deepen financial markets, the report said.

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