The International Monetary Fund has warned that increasing levels of domestic government borrowing from banks in Nigeria and other emerging markets could threaten the country’s financial stability.
According to the IMF, the pandemic has increased the amount of government debt emerging-market banks are holding, which could increase the pressures on public-sector finances, and threatening financial stability in the process.
The Washington-based lender disclosed this in a report titled, ‘Emerging-Market Banks’ Government Debt Holdings Pose Financial Stability Risks.’ It added that authorities should act to minimise the risk.
It said, “Governments around the world have spent aggressively to help households and employers to weather the economic impact of the pandemic. Public debt has mounted as governments have issued bonds to cover their budget deficits.
“The average ratio of public debt to the gross domestic product—a key measure of a country’s fiscal health—rose to a record 67 per cent last year in emerging market countries, according to Chapter 2 of the IMF’s April 2022 Global Financial Stability Report.”
