Finance Minister Caution Against Subsidy Return, Seeks Cheaper Financing

Speaking in his capacity as Chair of the G-24 Group of Nations, at a press briefing of the group on the sidelines of the World Bank/IMF Spring Meetings, Edun said policymakers must strike a delicate balance between inflation control and economic growth.

“There’s a critical balancing role here, where if interest rates are raised too early and too high in an effort to curtail potentially rising inflation, that too can do damage to the transformations which are taking place in economies,” he said.

“On the other hand, if interest rates are not moved in time, that too can do damage.  So the central banks have a balancing act  in helping to steer economies safely through this current energy crisis and geopolitical tensions.”

On Nigeria’s reform trajectory, Edun cautioned against policy reversals, stressing that hard-earned gains must be preserved. “Having made so much progress, it is important that we don’t have a return to generalized subsidies, a sort of relapse into policies that have not proven successful in the past,” he said.

He argued instead for targeted interventions, noting that “the focus really should be on helping the poorest and most vulnerable to cope with the increased pricing regime that they will face,” rather than abandoning reforms.

Providing context on the global energy shock, Edun explained that even oil-producing countries are not insulated. “It’s also not a one-way street,  even an oil producing country does have transmission of the higher costs, which feeds through from gas prices to fertilizer to food prices and so forth.”

On the growing debt burden, Edun delivered a stark warning: “The elevated borrowing costs and the debt servicing burden that developing countries are paying is weighing heavily on their ability to transform their economies and to achieve sustainable development.”

He revealed that the situation has worsened significantly. “When you look at debt servicing,  the outflow from debt servicing because of elevated interest costs outweigh what came in,” he said, underscoring that developing nations are effectively experiencing net resource outflows.

Backing this position, Director of the G-24 Secretariat, Iyabo Masha, noted that despite reforms by global institutions, gaps remain. She said, “even with that, the gap remains, and so there’s still much more they can do, especially on the debt side, on how they bring down the cost of borrowing.”

He, however, stressed that long-term resilience must come from within. “There has to be a reliance on domestic resource mobilization,  comprehensive tax regimes that not only improve resource mobilization but at the same time reduce the cost to the lowest earners,” he stated.

Other officials at the briefing included First Vice-Chair, Akhtar Javed, representing Pakistan’s Finance Minister, and Second Vice-Chair, Bernardo Acosta, representing Ecuador’s Minister of Economy and Finance.

On global trade and structural shifts, Edun pointed to rising fragmentation. “What we have seen in recent years is a retreat from a world trading system that is rules-based and orderly.  That has driven developing countries to focus on domestic production and more on regional integration.”

Edun warned that, “It is this type of self-help, self-reliance and domestic resource mobilization  that countries need to look to as the sustainable basis for transformation,” even as he reiterated that “the strong” nations and institutions must do more to support vulnerable economies.