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How Africa can survive oil price crash, by IMF



Nigeria to target African buyers for its crude oil, gas

To survive the global crash in crude oil prices, African countries whose economy are tied to the sale of the product will need to address fuel subsidy, cut 2015 expenditure profile, increase in tax rate and exchange rate flexibly where possible
This was the submission of Mr. David Robinson, the Vice-Director of the International Monetary Fund (IMF) while speaking at the IMF Africa Caucus meeting held in Angola.
He said the fall in oil prices is a significant negative shock for the oil exporting countries which have had to make marked adjustments.
Robinson, who presented the theme “Africa: Regional Economic Outlooks” pointedly said that public financial measures countries affected by crash in oil prices can adopt include “budget cuts in the 2015 expenditure, above all in investments, fuel subsidies reform, taxation measures, including tax rate increases, and greater exchange rate flexibility wherever possible”.
Robinson noted that the oil producing countries have to tackle issues such as the orderly implementation of spending cuts, prioritise social sectors and infrastructure and mobilise non-oil revenues.
According to him, it is necessary to address low liquidity in the foreign exchange markets in countries with flexible arrangements and the absence of foreign exchange instruments in countries whose currency is indexed to the Euro.
The forum of Africa caucus of the International Monetary Fund/World Bank Group in its deliberation urged Africa leaders to take immediate action to combat illicit financial flows in Africa. The forum assembles more than nineteen Ministers of Finance and fourteen Governors of the Central Banks of Africa countries.
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Speaking at the forum The President of the African Group and Minister of Finance of Angola, Armando Manuel, declared in the welcoming speech to the participants at the Luanda Caucus- 2015 meeting that the development of the continent continues to be affected by insufficient resources
He said “This obliges us to look for other sources of financing including savings that can be made from restricting illicit financial flows from Africa, especially measures that can be taken to radically reduce these mass monetary outflows and guarantee that they are used for development in the African continent”.

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Also in his opening speech Manuel Vicente, representing the President of Angola, José Eduardo noted that African countries must have a more comprehensive outlook, integrating the diversification of the economy based on national and regional value chains in potential competitive sectors.
“In truth, we have to add more value to our resources, whether in the directly productive activities, or through infrastructure and additional or supporting activities such as, transport and telecommunications systems, banking and financial systems generating integrated development hubs”, he said.

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  1. Aminu Baba

    October 30, 2015 at 9:49 pm

    Typical of IMF; always coming in when it is late and advancing the wrong prescriptions. It is a mystery why they are advising tax rate increases instead of efficiency in tax collection, which they agreed was the bane in third world revenue administration. I wonder wchich option would bring in more revenue for the governments; notching up the collection efficiency from 5% to lets say something like 20% or increasing the tax rate by say, 5% plus the accompanying societal resistance? Using my country Nigeria as an example, if the PPRAA template, the mechanism by which petroleum products prces are arrived at, is reset to take into account the fallen crude prices and cheaper international products prices, one would discover in reality that there is no subsidy whatsoever in the prices at the moment. Again what the government need to do is to step up the level of controls, supervision and due dilligence in the local and offshore refining as well as custody transfer processes of the products, in order to close the leakages and eliminate the huge fraud that is bedevelling in the sector. This leaves us with dextrous foreign exchange management and inreasing Cystoms and excise duties in non-essential goods and agric products, in order to protect local producers and encourage domestic manufacturing

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