More Proactive Push Needed For Central Bank Digital Currencies – IMF   

The head of the International Monetary Fund (IMF) has urged countries to make a more proactive push to develop Central Bank Digital Currencies (CBDCs). Eleven countries, including a number in the Caribbean, and Nigeria, have already launched CBDCs. Around 120 others are exploring them, although progress and approaches differ widely and a few have even abandoned the idea altogether. “We may be at a point where the public sector needs to offer a little more guidance,” IMF Managing Director Kristalina Georgieva said in a speech in Singapore. “Not to crowd out, not to disrupt,” she added. “But to act as a catalyst, to ensure safety and efficiency – and to counter fragmentation.” She made her remarks as the IMF published the first instalment of a “virtual handbook” on CBDCs, designed to help countries with the design and set-up process and ensure that the new technologies are globally interoperable. Supporters say CBDCs will modernise payments with new functionality and provide an alternative to physical cash, which seems in terminal decline. But questions remain as to why they represent an advance when current systems are already capable of many of the proposed benefits, and countries such as Nigeria that have already launched CBDCs are seeing very low uptake among the public. Georgieva said that with technology advancing so rapidly, countries needed to push ahead with development now to avoid getting caught out in future. “If anything, we need to raise another sail to pick up speed,” she said, likening the efforts to a nautical journey. “The world is changing faster than most imagined”.

IMF Advocates Fiscal Adjustments As Solution African Countries’ Debts 

The International Monetary Fund (IMF) has urged African governments to re-anchor fiscal policy through a credible medium-term strategy to avoid a debt crisis. According to the Fund in its report ‘How to Avoid a Debt Crisis in Sub-Saharan Africa’, it stated that to avoid a debt crisis, African countries seek to achieve key debt targets. The Bretton Woods Institute said the average debt ratio in the region has almost doubled in 10 years adding that the average debt ratio to gross domestic product (GDP) has increased to 60 percent as of 2022, which is a 30 percent rise compared to the figures of 2013. According to the Fund, this is what makes debt repayment costlier. “In most sub-Saharan African countries, fiscal policy focuses excessively on short-term goals and is not guided by a clear medium-term strategy. This lack of anchoring has resulted in frequent breaches of fiscal rules and ever-increasing public debt levels. “A more strategic approach to fiscal policy would be preferable by setting explicit debt targets that integrate key policy trade-offs between debt sustainability and development objectives, rather than focusing narrowly on short-term fiscal deficits. “The paper suggests a novel approach to estimating country-specific medium-term debt anchors, which ensures that debt service costs remain manageable. “The region’s ratio of interest payments to revenue, a key metric to assess debt servicing capacity and predict the risk of a fiscal crisis, has more than doubled since the early 2010s and is now close to four times the ratio in advanced economies,” the IMF said. In the report, the IMF said more than half of the low-income countries on the continent are at high risk or already in debt distress as at the end of last year. The multilateral also said mobilising more domestic revenue through the elimination of tax exemptions or digitalising filing and payment systems is key to avoiding a debt crisis as well. “Sub-Saharan African countries tend to rely excessively on expenditure cuts to reduce their fiscal deficits. “Although this may be warranted in some circumstances, revenue measures, like eliminating tax exemptions or digitalizing filing and payment systems, should play a greater role.” The IMF noted that mobilising domestic revenue is less detrimental to growth in countries where initial tax levels are low, whereas the cost associated with reducing expenditures is particularly high given Africa’s large development needs.