IMF Urges Central Banks To Restrategise Over Rising Financial Market Risks
The International Monetary Fund, IMF has urged world central banks to take note of the improving financial system across the world.
The warning came, to avoid looming dangers in the form of financial risks which will force about one-third of globally systematically important banks with assets worth $17 trillion to struggle in achieving sustainable profit.
However, the IMF, while unveiling its 2017 Global Financial Stability Report in Washington DC yesterday, advised central banks to have a new plan for unwinding unconventional policies to ward off market turbulence.
“The risks are the unsustainable level of non-performing loans (NPLs) across major banks, although the majority are recapitalising; increased borrowing by governments, particularly emerging and low-income countries like Nigeria; and the risk of poor implementation of the borrowed funds.
“Portfolio inflows to emerging economies are on track to $300 billion in 2017, more than twice the totals over the past two years. But this greater reliance on foreign borrowing may at a point become a vulnerability, particularly for low-income countries if they are not put to good use,” said the Financial Counsellor, IMF, Tobias Adrian.
Adrian said borrowings by governments, households and companies, excluding banks, in the Group of 20 (G-20) economies, for which Nigeria is aspiring to join, has exceeded $135 trillion, equivalent to about 235 percent of their combined Gross Domestic Product (GDP).
“Despite low-interest rates, debt servicing burdens have risen in several economies. And while borrowing has helped the recovery, it has also created new financial risks, accompanied by an underlying deterioration of debt burdens as measured by the debt service ratio.
“Major central banks should focus more on the business models of banks to ensure sustainable profitability. This is not the time for complacency. The time to act is now. Otherwise, future growth could be at risk,” he added.
In Nigeria, a recent data from the Nigerian Bureau of Statistics, NBS, put the country’s total debt as at June 30, 2017, at N19 trillion, while the servicing is put at more than N1.7 trillion in the national budget.