Adeosun says new debt strategy will propel development

Minister of Finance, Mrs. Kemi Adeosun, has said that the new debt strategy being adopted by Federal Government has the potential to boost development.

While welcoming the advice of international development partners, Adeosun stated that a key element of the economic reform strategy was the mobilisation of revenue to improve the debt service to revenue ratio.

“The proposed refinancing of US$3Bn worth of short terms Treasury Bills into longer tenured international debt is expected to save N91.65 billion per annum.”

According to her, the strategy would achieve a number of objectives that include: mobilising revenue whilst reducing the debt burden by lengthening the maturity profile, increasing foreign exchange reserves, reducing crowding-out of the private sector, and creating savings in debt service cost.

This is being undertaken through a number of initiatives including, the plugging of leakages and the deployment of technology revenue management.

She specifically cited the example of the Health Pay, a pilot cashless revenue project in the health sector, which recorded material increases in revenue.

The ongoing Voluntary Assets and Income Declaration Scheme (VAIDS) was equally expected to impact positively the level of tax collections.

According to her, “The difference in our economic strategy is that we are changing the mix of revenue sources available to the government from the traditional oil or debt to a combination of oil, debt and domestic revenue.

“This is a long-term strategic reform which is critical to our future economic growth and in the short term will enable our debt service to revenue ratio to improve.”

In addition, the Minister noted that the Government was refinancing its inherited debt portfolio and this will lead to significant benefits, particularly a reduction in costs of funds.

“Other benefits of our revenue and debt management strategy include: improvement in foreign reserves as well as reduced domestic debt demand, which will reduce crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates,” the Minister added.

The Government, according to her, does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plans (ERGP) reforms, over the medium term, is such that the naira is expected to strengthen.