The International Monetary Fund has alerted Nigeria and other developing economies over the need to prepare for instability in financial markets.
The financial institution expressed that as a means of containing foreign exchange fluctuations some countries such as Nigeria should consider expanding their debt maturities.
IMF, in a blog post titled ‘A Disrupted Global Recovery’, stated that the monetary policy stance tightens more broadly this year, while economies will need to adapt to a global environment of higher interest rates.
It further said in some cases, foreign exchange intervention and temporary capital flow management measures may be needed to provide a monetary policy with the space to focus on domestic conditions. With interest rates rising, low-income countries, of which 60 percent are already in or at high risk of debt distress, will find it increasingly difficult to service their debts.
The G20 Common Framework needs to be revamped to deliver more quickly on debt restructuring, and G20 creditors and private creditors should suspend debt service while the restructurings are being negotiated, it added.
According to the IMF, as the policy space diminishes in many economies, fiscal deficits are expected to shrink in most countries.
However, the IMF said that while emerging markets were more resilient with higher reserves, financial vulnerabilities would remain, especially in higher public and private debt countries.
