Africa Needs International Help to Turn Promises Into Progress By Rodrigo de Rato, IMF Managing Director

November 12, 2004

By Rodrigo de Rato, Managing Director
International Monetary Fund
Business Day
South Afica
November 12, 2004

Many countries in Africa have made notable progress achieving economic growth and stability over the past decade, thanks to the commitment of their governments to growth-oriented policies and, most recently, the strong global expansion. Economic growth in sub-Saharan Africa this year (4.5%) would be at its highest level in a decade.

But this welcome progress remains too modest to achieve continent-wide inroads against poverty. Some countries are seeing incomes rise, health care improve and educational opportunities expand. But many face daunting challenges if the scourges of poverty, disease and illiteracy are to be conquered. Developed countries, international institutions and African governments have made commitments to address these challenges. It is time to turn pledges into action.

The need to act on commitments has been underlined by my experience since I became MD of the International Monetary Fund (IMF) in June. I have travelled to Africa twice to meet heads of state, civil society representatives and others, addressing the Extraordinary Summit of the African Union in Burkina Faso. At last month's IMF-World Bank annual meetings in Washington, the fund's members held talks on challenges of growth, poverty reduction, aid flows and debt relief.

The IMF shares Africa's strong commitment to tackle the challenges of growth and poverty reduction. Our common objective is the Millennium Development Goals, and our strategy of partnership was defined in 2002 at the Monterrey conference. The industrial countries have pledged to increase aid and reduce trade barriers. The IMF and World Bank will offer advice, expertise and financing. Crucially, developing countries will pursue sound economic policies and good governance, a foundation that already exists in the New Partnership for Africa's Development (Nepad).

However, even though the way forward is well defined, progress has been far too slow. At the current pace, the millennium goals will not be achieved in Africa in the next decade, probably by a wide margin.

That requires all parties to do more with urgency.

For Africa, this means redoubling efforts to put in place the reforms to achieve high and sustained levels of growth. This will require a vibrant private sector, with high levels of investment from domestic and foreign sources. In addition, experience in Africa and elsewhere shows a healthy business and investment climate requires sound and corruption-free institutions that facilitate a predictable legal and regulatory environment.

As aid flows rise as they must African countries will need to be well prepared. For example, public spending management systems must be reinforced so that other essential spending, including on much-needed public infrastructure, is not crowded out.

High oil prices are putting pressure on prices and external accounts in many African countries, and the IMF stands ready to assist countries in their efforts to tackle these pressures. But oil-producing countries face challenges as well, as windfall revenues pressure weak institutions and potentially undermine governance.

Sustained growth and poverty reduction will require increasing transparency and strengthening medium term fiscal frameworks to ensure revenue from natural resources is used effectively. The Extractive Industries Transparency Initiative, adopted by several African countries, is a helpful step. The IMF can provide the support needed to enable Africa to make rapid progress, whether in the form of policy advice, technical assistance and training, or financial assistance.

An important part of all IMF support is to help countries make the best use of the available resources. In this context, it is essential that our work fully supports the higher levels of aid that are in prospect especially as the effort to address the HIV/AIDS pandemic gains momentum.

If we are to achieve the millennium goals, the heaviest responsibility inevitably must fall on the advanced economies, which have a dual task. First, they must meet their commitment to provide higher levels of aid, whenever possible on grant terms. Current aid flows are insufficient, unpredictable and often uncoordinated among donors. Better co-ordination and multiyear commitments are key to making development assistance more effective.

Second, the developed countries must improve access to their markets for developing country exports and dismantle trade-distorting subsidies. The framework agreements reached at the World Trade Organisation last July are welcome, and place the Doha Round back on track. This needs to be followed by determined progress to maintain the momentum and achieve the goals of the Doha development agenda. In doing so, both rich and poor countries carry responsibilities in promoting the fuller integration of developing countries into the global trading system. Trade barriers in and among many developing countries themselves remain too high.

What is needed now for developed countries to fulfill their commitments on aid and trade is political leadership. Several welcome proposals are on the table to provide additional resource flows to low-income countries, but they call for sometimes difficult trade-offs. It is incumbent on political leaders everywhere to explain that global gains will outweigh the costs.

Progress against poverty is achievable, as the experience of many countries, especially in Asia, shows. But Africa cannot go it alone. Growth and poverty reduction will come only through an international partnership that turns promises into progress.


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