By Collins NwezeDeveloping countries have been warned that the various invention funds they got to cushion the effects of the COVID-19 pandemic have consequences.The International Monetary Fund (IMF) warned that higher debt service costs arising from the gestures would hinder recipients ability to address social needs.The worlds financial institution also listed rising poverty, growing inequality and difficulties in correcting the setback in human capital accumulation as other fallouts.In its Global Financial Stability Report released on Tuesday in Washington, DC, the IMF also predicted that the global economy is finally emerging from the worst phases of the COVID-19 pandemic, although with diverging prospects clearly across regions and countries.The Director of the Monetary and Capital Markets Department at the International Monetary Fund, Tobias Adrian, said extra-ordinary policy measures have eased financial conditions and supported the economies, helping to contain financial stability risks. But those rescue efforts may have unintended consequences and sow the seeds of future financial market instability.He said: Addressing corporate-sector weaknesses and repairing balance sheets is a priority, saying advanced economies should tighten selected macro-prudential tools to safeguard financial stability, while avoiding a broad tightening of financial conditions. Emerging markets should rebuild buffers, to prepare for a potential repricing of risk and a reversal of capital flows, he stated.Adrian said the IMF, along with other international institutions, is ready to support troubled economies in the uncertain times ahead.In his opinion, continuing policy support remains necessarybut targeted macro-prudential measures should pre-empt a legacy of vulnerabilities.Read Also:Fed Govt. to IMF: food situation, unsustainableAdrian said: For many Frontier Markets, access to funding remains a major challenge, given their limited access to bond markets. The corporate sector is emerging from the pandemic over-indebted, facing high solvency risk. Meanwhile, in the banking sector, concerns about the credit quality of hard-hit borrowers and about the profitability outlook are likely to weigh on banks risk appetite.A rapid and persistent increase in rates may result in a repricing of risk and a tightening in financial conditions at a time when valuations are stretchedand when the recovery may still be fragile. Such a tightening of financial conditions could interact with elevated financial vulnerabilities, creating knock-on effects on confidence and endangering macro-financial stability.The economic trauma would have been much worse if the global economy had not been supported by the unprecedented policy action taken by central banks and by the fiscal measures implemented by governments.Looking ahead, continuing policy support remains necessary. But policy measures should also address financial vulnerabilities to avoid a legacy of structural problems. There is a pressing need to act, he urged.Also yesterday, the IMF predicted a 2.5 per cent growth in Nigerias economy this year. The forecast was contained in IMFs World Economic Outlook update.In the forecast released in January, the global lender predicted 1.5 per cent economic growth for the country. The January forecast was a downward review from the October 2020 forecast.The latest projection, which is one per cent higher, showed increased confidence in the Nigerian economy which exited recession in the fourth quarter of last year with a meagre 0.11 per cent growth.The Fund also projected that sub-Saharan Africa will strengthen to 3.4 per cent in 2021, 0.2 per cent higher than the previous forecast.It expects the world economy to grow by six per cent in 2021, up from its 5.5 per cent forecast in January, a stronger economic recovery in 2021 as Covid-19 vaccine rollouts get underway.The report said: Global growth is projected at six percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO.The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility. Click here to read full news..