Iyabo Masha is the Director of the Intergovernmental Group of 24 on International Monetary Affairs and Development (G24). She is a global economist with a strong focus on macroeconomic and financial policies. She served as a member of Nigeria’s Presidential Economic Advisory Council from 2019 to 2022.
Prior to that, she worked on a range of countries at the International Monetary Fund, Washington DC, negotiating IMF lending programmes and developing non-programme policies for emerging market and low-income economies in Africa and Asia. She also served as IMF resident representative for Sierra Leone. Ms Masha joined the IMF from the Central Bank of Nigeria (CBN) in 2003, where she led the research department’s annual monetary programme. In 2023, she became the first African Director of G24.
In this interview with PREMIUM TIMES’ Business Editor, Oladeinde Olawoyin, on the sidelines of the World Bank/IMF meetings in Washington DC, she spoke on a wide range of issues such as illicit financial flows, economic development, multilateralism, trade, and how the G24 is helping developing economies address debt issues.
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PT: Give us an insight into the work that you do at G24 and how you’re trying to help countries address developmental challenges and fix their economies.
Masha: The G24 is a grouping of 29 countries from Africa, Latin America, and Asia. They come together to pursue common economic interests, especially as it impacts the decisions that are coming out of the Bretton Woods system, the World Bank and the IMF.
So it was founded more than 50 years ago and it has been instrumental in making some of the changes in policies that contributed to better outcomes for developing countries. The whole group accounts for about 80 per cent of the world population and more than 60 per cent of GDP. So it’s a pretty large group.
Many of our members that started as developing countries decades ago have now graduated and are in the top 10 economies in the world. China, Brazil, India, they are members of the G24. So we have come a long way, but we have also been able to achieve a lot.
PT: There are conversations around the de-dollarisation of economies across many parts of the world and how does the G24 come into this equation?
Masha: The issue of de-dollarisation has been on the global agenda for decades. Indeed, even 20, 30 years ago, people were talking about de-dollarisation and the way to look at it is that, okay, the US dollar is like the global currency, though it belongs to the US, but it is used in the settlement of more than 60 per cent of trade transactions. It accounts for more than 80 per cent of the global external reserves of countries.
So in that sense, it is a currency that is very much in high demand. Now, in recent times, the discussion around de-dollarisation has gotten to a very strong level, and that’s for two reasons. One is that if, as a country, you hold a sizable amount of dollars, then it means that any policy of the Federal Reserve Bank on interest rates, on exchange rates is going to have a spillover impact on countries that hold the dollar. So the first reason why the discussion about de-dollarisation is coming up is because countries want to be in a position to protect themselves against the monetary policy of the US
Now, the second reason why it’s coming up is because some countries are under US sanctions and they are unable to complete any transaction in the dollar. And what that means is that they cannot pay other countries because the dollar is the only currency that other countries accept. And some of them, their assets are frozen. So that’s the second area where the discussion of de-dollarisation is coming up; that is because we put our foreign reserves in dollars, so does that mean that we cannot conduct any economic policy without adverse effect?
Then the third reason why de-dollarisation is coming up is just a product of digitalisation and technology. With the ongoing advances in technology, in digitalisation, how the payment system has become so digitalised and a lot of different payment solutions available. Countries are also wondering what will be the next step? Is it… are they going to now be able to take advantage of digitalisation and do away with the dollar? So, that’s the context in which de-dollarisation is coming up.
PT: In all of these conversations, especially among your member countries, what’s the place of G24? And how do you come in to address some of the concerns being raised by those countries?
Masha: Well, what we try to do is to develop policy positions on the potential impact of such a possibility on our members and also to share with them some of the knowledge out there on de-dollarisation and how it will impact them. I mean, the way to look at it is that whilst it is possible to have many intermediary payment systems, different types that do not involve the dollar, at the end of the day, the final settlement has to be done in a particular currency. And so that is why I have some reservations as to whether there can be any complete loss of use of the dollar because to make a final settlement, it will most likely be in dollars.
But we do, from time to time, hold seminars and educate our members on how the advances are progressing, what are the potential impacts and how they should prepare themselves for the possibilities of a post-dollar world.
PT: There have been reports that Africa particularly loses so much to illicit financial flows due to principally criminal activities and sometimes even tax evasions and all of that. So what are the interventions that you’re making as a bloc to address illicit financial flow, especially in Africa, where it is very rampant?
Masha: Yes, indeed. The AU set up a high-level committee on illicit financial flow chaired by President Thabo Ibeki, former president of South Africa. And in one of their reports, they alluded to the fact that more than $100 billion is lost annually in Africa alone on illicit financial flows and tax evasion.
So yes, that’s a big issue. If a continent is losing $100 billion as a negative flow outside, that is $100 billion that is not available to pursue infrastructure projects, to develop schools, health facilities, and meet both sustainable and climate goals. So that’s an important issue.
What we have done in our work is to push for some international mechanisms to address these issues, because it’s about both demand and supply. The country where the resource is domiciled is one, and the country where it is being taken illegally is another. So the way we have found it useful is to pursue for reforms of the international tax cooperation mechanism so as to reduce those kinds of flows.
And I can give three specific examples. For the OECD G20 framework on international tax cooperation, one of the areas in which we provided some inputs is how to allocate the different taxing rights because a lot of these illicit financial flows actually go out in a legal way.
They go out as profit or whatever, but they are not well-recorded; or the officials of the countries, they really don’t know that these flows are illicit. So we’ve taken the position that the taxing rights in a country should be based on significant economic presence. We have provided to the United Nations system the request to have protocols on illicit financial flows and tax evasion.
And we are also doing that in the context of the UN Framework Convention that is under development. In addition, each of our regional groupings have a kind of association that focuses on taxation. And so the tax authorities from the different countries are able to get together to share knowledge.
So, in Latin America, they have the PTLAC and (in) Africa, they have ATAP, which is the Africa Tax Administration Forum. So they do a lot to train the tax officers in member countries on how to recognise some of these illicit flows and how to be able to negotiate better for their countries.
So that’s in a nutshell, what we are doing on illicit financial flows. In addition, part of the work that is being done at a global level is to set up an exchange, automatic exchange of information so that any country that is part of that exchange can get information on other countries.
If you have a company operating in your country and you want to get information about what they are doing in another country relating to tax issues, you can get that. So many of our countries are signatories to that automatic exchange of information. In addition, many members are also signatories to what we call the Beneficial Ownership Convention, which is an agreement that countries will now insist on knowing the beneficial owner of any assets.
And what that means is that, I mean, it’s not just that, “oh, this particular asset or bank account is registered in the name of a company.” That’s not enough. The ultimate beneficial owners who will be the beneficiaries are the ones that will be on record.
Many countries have started operating it. I don’t know how far other countries have gone, but beneficial ownership is very important to be able to trace illicit financial flows, to know where it’s going, to know who is behind it.
PT: In the communique you (G24) released on Tuesday after the ministers’ and governors’ meetings, there were concerns raised on the protectionist policies of some countries of the world, usually the superpowers, and how that could stifle global trade. And then you also rallied support for the WTO. So what do you think are measures that could be put in place by member countries and even those other countries of the world to enhance global trade? And why are countries adopting some of these protectionist policies that stifle trade, to start with?
Masha: Well, I think the issue is that over the past two decades up until 2015, trade was an engine of growth. With globalisation, with openness, many countries made significant progress by developing export-oriented industries and being able to put millions of people out of poverty because the export sector tends to be very labour-intensive. Now, since the global slowdown, say from around 2020, so countries are now thinking that, okay, I mean, maybe they need to look at how those policies are impacting their own domestic circumstance.
If I can use the US as an example, they were China’s largest trading partner, importing mainly from China, but from around 2018 up to now, they started this idea of huge tariff. But in many cases, the response of trade policies is because domestic economic conditions are not good enough. And so in order for them to maybe get their people to get their support, they have to show that they are now trying to avoid being the dumping ground for products.
So in the US, for example, you have huge segments of the country, especially in the middle belt, that witnessed what we call de-industrialisation…because those areas were full of industries. But then when it became cheaper to produce from other countries, they closed down.
And many people in those regions were rendered jobless. So it’s probably similar to what is happening in Nigeria, but responses differ. Countries felt that they needed to bring back production to their country. And the way they were doing it was increasing the tariff, because once they increase the tariff, then the price of the export would not be competitive, and then production will start. Then in the case of the US, they also introduced specific legislation to bring production back to the US during the Biden era. So they brought, they actually did, the Inflation Reduction Act was essentially industrial policy that helped them.
And many industries started coming back, they incentivised. So I mean, it’s protectionist policies, but if you look at it from the point of view of the exporters, because they too, they will be losing jobs, and the governments will be losing revenue. So that is why we feel that there should be a way to do it in an orderly way that is a win-win for both importers and exporters.
The second part of it is some countries are saying that to bring in certain products to our country, these are the…we want to meet the climate goals, and so these are the climate goals that have to be met in terms of decarbonisation. And again, that is also affecting other countries. So the position of the G24 is that WTO is at the centre of global trade, and so let’s all come together and resolve this issue within the WTO framework. (We are saying) that if each country is bringing up its own goals, then it’s going to be chaotic.
But if everybody comes together under the umbrella of WTO, then the world can make better progress.
PT: There are concerns in many countries of the world, especially developing countries like Nigeria, in terms of currency depreciation, high debt, rising debt service costs, and all of that. And I mean, those are the conversations that we’re having at most of the side events here. Are there policy suggestions that you think could help, especially for members of the G24?
Masha: Well, I mean, I think each country’s circumstance is different. So it depends on the country’s circumstance. So, there are some countries that pursue very good macroeconomic policies, they have very strong fundamentals, but the external environment works against them. So those ones, the solution to their problem will be different from those that do not have good economic fundamentals, and now their currency is losing value because of that. Each country’s situation is different.
What we were advocating is that if a country has very good fundamentals, it’s running a rule-based economic policy framework, and all of a sudden, the US dollar starts appreciating and appreciation of the US dollar means that some of a country’s payments on maybe their debt or their bond payments will have to go up. That’s not their fault, okay? So that is where we’re calling for multilateral action to support those kinds of countries. We are calling for a market-based mechanism that will support countries with liquidity crises. So those ones are liquidity challenges. They are not insolvent, but they are illiquid because the external environment has moved against them.
Now, the other type of problem, the other side of the coin, is countries that do not have good fundamentals. Maybe their production capacity is very weak; they are not producing much domestically; they are not running a rule-based monetary system, in which case their monetary policy is very loose. And on top of that, maybe they have a very huge debt portfolio.
So in those kinds of countries, the solution is one that they have to keep their house in order first. When they keep their house in order, then whatever reforms are made at the global level, at the multilateral level, they can then take advantage of it. But if they don’t keep their house in order, there’s really no solution to the problem.
PT: Interesting. I think in the communiqué you released also, you mentioned that there has been really, really impressive ambition when it comes to climate financing, but the commitment in terms is not really commensurate with the ambition. So what do you suggest are possible solutions to that going forward, especially for your members?
Masha: The estimated spending requirement globally to meet both climate and development goals is running into about 3 trillion dollars per year between now and 2030. And out of that, some will come from domestic sources, whatever a country is raising domestically and they are putting it towards their climate development goal, that’s part of it. But the other would also come externally, which is what they get from the World Bank, from IMF, from the regional development banks. So what we’re saying, what we have requested for, and which has already been implemented, is for the development banks, the likes of the World Bank, to raise their ambition to increase their lending portfolio.
But they also need more capital to do that. So next year, they’re going to begin a process to determine how much capital they need to raise in order to be able to support all these goals. That is one.
The other is being able to use effectively some of the existing instruments, like the SDR, which the Africa Development Bank has now been able to have an approval on as a hybrid capital that they can use to lend. That is one. Then the other one is also for the banks to incentivise private sector capital mobilisation and also deepen the domestic market in the developing countries so that they can lend more domestically.
So those are the main areas in which we see that if these are implemented, then it means that there will be, I mean, at least there will be more capital on the table. Then it’s now for the banks to lend this money out for global public goods.
PT: In most of the conversations I’ve been at, at sideline events and all, countries are demanding that the IMF and the World Bank should increase their support in terms of concessional loans. And actually, for those that are facing sustainability issues, debt issues, what’s the feasibility that they will get this kind of support going forward? For countries where all of these orthodox policy reforms are being implemented, there is tension, there are concerns, people are complaining, most of the governments need support to perhaps provide safety nets and buffers for the vulnerable. So, is it feasible that they will get support in most of these countries, maybe after these meetings? And what would you, as G24, suggest as a possible way out?
Masha: Well, definitely the resource envelope for the World Bank is going to be larger, so the countries will then have access to be able to apply for these loans. For the very low-income countries, they get it at almost zero per cent, because most of them go through, in the World Bank, they go through what they call the IDA window. IDA window is for poor countries, so they get their loans at close to zero per cent. And then if it’s IMF, most of them will go through what they call the PRGT, which is also a very low interest rate. So, yes, there’ll be more resources available and it will be at an affordable cost.
But, you know, a lot depends on the domestic policy framework. So, I mean, the point is that there’s no magic that IMF or World Bank money can do if the domestic policy framework is not sound.
PT: Some final words in terms of what you do, probably the vision for G24 going forward, before the next meetings…?
Masha: For us, we, the World Bank and IMF have started a process on the 80th anniversary of the Bretton Woods system because, in fact, today, 80 years ago, was when the United Nations Treaty was signed and the Bretton Woods system were formed, but they didn’t take off until a few years after.
So, I think it’s been a relatively good journey for the world to have two organisations, the World Bank and the IMF, at the centre of the global economic discourse. But we have to look back and see what succeeded in the past and what we can do better going forward. Some things have succeeded. When the World Bank came into being, it was just focused on post-war reconstruction in Europe and it did that within ten years, Europe was fully back on its feet. So we are hoping that those kinds of achievements will be replicated for developing countries. But much more than that, the governance of the organisations, there is an expectation that they would better reflect the size of the developing economies. So that will make the leadership more transparent and that will give more integrity to the policies of the organisations.
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