Policy Instruments to Manage Global Shocks

Transcript:Policy Instruments to Manage Global Shocks:
Policy Instruments to Manage Global Shocks Economic Growth Forum V – FY 2021/22 (January 13, 2022) Michael Atingi-Ego Deputy Governor Overview of global shocks Global shocks can originate from the financial world, cyberspace, biological and solar systems. The growing interconnectedness of the global economy, through financial and trade linkages, has created conditions for rapid and widespread disruptions from shocks. For low-income countries, because of limited diversification, pre-existing structural inefficiencies and narrower fiscal space, any adverse shocks, even temporary ones, can have profound impact on the economy. There is therefore need for effective policies and instruments to manage shocks. 2 Policies and instruments to manage global shocks 3 i). Ex-ante policies & instruments ii). Ex-post policies & instruments Case for Ex-Ante policies and instruments 4 Ex-Ante policies and instruments 5 Ex-Ante policies and instruments - Other considerations 6 Case for Ex-Post policies and instruments 7 The need for effective ex-post policy instruments: Sharp swings in terms of trade can serious affect economic growth, fiscal and external positions. Shocks can result in considerable macroeconomic and output volatility, which in turn increases risks and uncertainty for the private sector and the government. Abrupt revenue losses amid increased spending leads to budgetary uncertainty and perpetuates procyclical policy response. Abrupt revenue losses amid increased spending, without concessional financing, can complicate the country’s debt sustainability metrics and erode fiscal space. Ex-post policies and instruments 8 The ex-post policies and instruments include: Ex-Post policies and instruments 9 Conclusion 10 Build capacity of the responsible MDAs to undertake pre-arranged financial safety nets with the ITI. THANK YOU 11