Business

FG dumps local borrowing for foreign loans

Published

8 years ago

June 15, 2016

FG dumps local borrowing for foreign loans

The Federal Government, Wednesday, said it has resolved to adopt more of external borrowing so as to achieve its aim of stimulating the economy and providing the infrastructure that the nation needs.

The decision was one of those taken at the Federal Executive Council, FEC, meeting which was chaired by the acting Presedent, Yemi Osinbajo today.

The FEC also approved a new Debt Management Strategy for the country.

This was disclosed by the Minister of Finance, Kemi Adeosun, alongside the Minister of Information and Culture, Alhaji Lai Mohammed and the Minister of State, Budget and National Planning, Zainab Ahmed, after the meeting presided over by Vice-President Yemi Osinbajo.

According to Adeosun, government decided to produce a new debt management strategy for 2016 to 2019 because the previous one had expired in December 2015 and there was a need for a new one.

She added that the document was also produced because of the current economic challenges and the economic will of the government to reflate and diversify the economy.

The minister explained that the government decided to embrace external borrowings because they are more cost effective and come with more beneficial terms.

Read also: CBN sets stage for devaluation, hands-off naira

She said: “We felt there was a need for a new debt management strategy and the strategy is based on the Medium Term Expenditure Framework as prepared and presented by the Ministry of Budget and National Planning.

“That MTEF assumed that we would reduce our domestic debt from one percent of GDP to 0.7 percent by 2019.

“The reason for this is that the government recognises that for the next three years, to really stimulate this economy and to provide the infrastructure that we need, we would need to be borrowing.

“We need to borrow at the most cost-effective rate and at the most cost-effective and beneficial terms.

“The government recognises that there is a need to stimulate the private sector. For the private sector to really grow. banks must lend to the private sector so we don’t want government borrowing crowding out the private sector.

“Government had taken a strategic decision that, where possible, we would borrow more externally. That is the external debts in dollars or in any other currencies because the interest rates are cheaper, the tenures are longer and there is more room for banks to lend to the private sector especially SMEs. So the strategy was approved by FEC after much debate”, the minister said.

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