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Policies for Faster Growth and Poverty Reduction in Sub-Saharan Africa and the Role of the IMF
An IMF Issues Brief

By IMF Staff

December 2000

Also available:
I   Introduction
II   Recent Economic Developments and Near-Term Outlook
III   Economic Policies for Higher Investment and Growth
IV   Governance and Related Issues
V   Role of the IMF
1.   Poverty Reduction Strategies and Debt Relief in IMF-Supported Programs
2.  South Africa
3.  Nigeria
4.  Cases of Sustained Adjustment in Africa
1.   Sub-Saharan Africa: Macroeconomic Developments and Projections, 1982-2001
2.  Sub-Saharan Africa: Real Gross Domestic Product Growth Rates of Strong Performers, 1982-2001

After two decades of economic stagnation and little progress in poverty reduction, the seeds of an economic renaissance in sub-Saharan Africa, with faster growth and less poverty, have been sown in recent years. This Issues Brief, after reviewing recent economic developments, outlines the key policy issues that countries in the region will need to address and the contribution that the international community, including the IMF, will need to make to build on recent gains and establish a virtuous cycle of sustained high-quality growth. The IMF inaugurated the series of Issues Briefs in April 2000 to provide succinct surveys of current economic policy issues for nonspecialist readers; it is designed primarily to make background material available and to facilitate debate on issues of topical interest.

I. Introduction

Sub-Saharan Africa's economic performance in the 1980s and the early 1990s was disappointing, with much of the region unable to break away from paths of low or negative per capita income growth, high inflation, and balance of payments difficulties. Then, from 1995 to 1997, performance improved and real per capita incomes began to rise. The improvement reflected primarily a new commitment by many countries to sound macroeconomic policies and more open and better managed economies, to address the daunting economic and social challenges that exist throughout the region, as well as better terms of trade. Where these policies have been sustained, they have raised growth and reduced poverty. Such policies have often been adopted in the context of medium-term policy programs supported by the IMF and the World Bank.

Despite the recent progress, growth remains fragile, standards of living are still very low, and poverty is widespread. Health and education indicators continue to be poor and, in some countries, job opportunities have not kept pace with the growth of the labor force. Countries remain vulnerable to changes in climatic conditions, including floods and drought, and they depend heavily on external concessional assistance. The region has been unable to share fully in the benefits of globalization. In most countries, inadequate infrastructure, weak tax administration and poor enforcement, tax and investment policies based to a large extent on bureaucratic discretion as opposed to transparent rules, limited access to information technology, poor communication facilities, undeveloped financial services, and weak judiciaries have all militated against fuller engagement in the international economy. Armed conflicts are damaging economic prospects in the region. In many countries, the spread of HIV/AIDS is reducing labor productivity and human welfare on a dramatic scale.

This regional survey outlines policies that would improve prospects for faster sustainable growth and poverty reduction in sub-Saharan Africa. Faster sustainable growth is essential for improving living standards and reducing poverty: given the low level of per capita income in the region, redistribution alone would barely dent the problem of poverty. In addition to the need to maintain the focus both on macroeconomic stability--through appropriate fiscal, monetary, and exchange rate policies--and on structural reforms to improve the efficiency of markets, there are fundamental challenges in three key areas:

  • One challenge is to design and implement comprehensive policy strategies that promote faster growth and poverty reduction and at the same time have the broad public support needed to ensure their sustainability. These objectives require greater participation by civil society in consultation on program design, and more efficient use of public sector resources for poverty reduction.

  • A second challenge is to improve governance, promote the rule of law, encourage openness and transparency of government, reduce opportunities for corruption, and create a more favorable environment for private sector investment and production. All these will enhance productivity and competitiveness and help to secure the full benefits from the ongoing globalization of the world economy.

  • A third challenge is to strengthen external payments positions. Debt relief in support of poverty-reducing policy programs has an important role here, especially for the lowest-income heavily indebted countries.

The IMF provides its member countries in Africa, as elsewhere, with policy advice, financial assistance when needed in support of economic policy programs, and technical assistance. Since the late 1980s, the IMF's financial assistance for low-income countries, including those in Africa, has been provided on concessional terms, including an annual interest rate of 0.5 percent. Between 1987 and 1999, this help was provided through the Fund's Enhanced Structural Adjustment Facility (ESAF). But in late 1999, the ESAF was transformed into the Poverty Reduction and Growth Facility (PRGF), signifying a new approach to policy programs and poverty reduction, adopted in collaboration with the World Bank and other international creditors and donors (Box 1)1.

While continuing to stress that economic growth is the essential and primary source of poverty reduction, the IMF is now placing greater emphasis on poverty reduction itself as a central objective of economic policy in the poorest countries. Another feature of the new approach is the emphasis placed on country "ownership" of the policy programs supported by the PRGF. The broad strategy is set out in a Poverty Reduction Strategy Paper (PRSP) prepared by the borrowing country with the participation of civil society, including the poor. The PRSP will not only promote country ownership of the policy program, but also, through its comprehensiveness, contribute to the coherence of policies. Also, since it will be the key strategy paper for the country's relations with all creditors and donors, it will help to ensure consistency in lending practices among the IMF, World Bank, and other creditors and donors. The new focus on poverty reduction implies increased emphasis, for example, on policies that benefit the poor directly, including expenditure on primary education, health, and rural infrastructure.

In conjunction with this new approach, the IMF and the World Bank, together with other creditors and donors, are intensifying their efforts under the initiative launched in 1996, to bring debt relief to the Heavily Indebted Poor Countries (HIPCs). In late 1999, the HIPC Initiative was enhanced with the aim of bringing faster, deeper, and broader debt relief to the HIPCs, and at the same time to create a closer link between poverty reduction and debt relief. Since the key objective of debt relief is to help countries grow and reduce poverty, a country's request for HIPC assistance is based on the poverty reduction strategy described above and the IMF extends its support for the initiative through the PRGF. This approach to debt reduction is based on the simultaneous participation of all official creditors, both bilateral and multilateral. Renewed efforts were made by the World Bank and the IMF during 2000 to accelerate the delivery of debt relief with the aim of approving debt relief to 20 countries (mainly in Africa) by year-end.

II. Recent Economic Developments and Near-Term Outlook

Structural reform gained momentum in a number of sub-Saharan African economies in the second half of the 1990s. Efforts to integrate countries of the region into the world economy included the adoption of market-determined exchange rates through the liberalization of exchange restrictions. Tariff and non-tariff barriers to trade have been lowered, although these barriers still remain generally higher than in other regions. In most countries, the restructuring and privatization of inefficient public enterprises was initiated, albeit with varying degrees of success. Some countries made progress in liberalizing labor markets; fiscal reforms gained ground; and numerous countries took steps to eliminate selective credit controls, and to adopt indirect instruments of monetary policy, including market-based interest rate policies.

Real GDP growth in the region rose to around 4 percent a year during 1995-97, and real per capita GDP growth turned positive (Table 1). This improvement in performance, evident through most of the region, reflected in large measure better macroeconomic and structural policies. In the CFA franc zone, the benefits of the 1994 devaluation also played an important part. However, economic growth slowed in 1998-99 and the level of output per head declined, partly reflecting persistent civil unrest in numerous countries. The thrust of economic policies, however, generally remained positive. While governance problems worsened in a number of cases, there were favorable developments in two of the largest countries as the democratic process was consolidated in South Africa and an elected government took office in Nigeria.

Economic growth in sub-Saharan Africa is projected to average about 4 percent annually in 2000-01, thereby enabling real per capita income to again begin rising, albeit very modestly. A number of developments are favorable for the near-term outlook:

  • In South Africa, there has been impressive progress in strengthening the public finances, the financial system is robust, external competitiveness has improved, and growth is picking up (Box 2).

  • In Nigeria, in addition to benefits from higher oil prices, governance problems are being addressed, although much remains to be done to correct the harm caused by decades of mismanagement (Box 3).

  • More rapid growth in South Africa and Nigeria would have considerable spillover effects throughout the region because of their economic size.

  • Sounder macroeconomic policies are helping lower inflation, which averaged 55 percent a year in the region in 1991-94, to a projected rate of around 10 percent in 2001, and less in many countries, including Cameroon, Côte d'Ivoire and Senegal.

  • Structural reforms continue to be pursued with determination in several countries, including Cameroon, Mali, Mozambique, Rwanda, Tanzania, and Uganda (Box 4).

  • Democracy continues to spread in the continent, benefiting governance. Economic performance of established democracies like Botswana and Mauritius has been well above average. The records of Benin, Mali, and Mozambique have improved since the advent of democracy.

However, persistent weaknesses of world commodity prices, including cotton, cocoa, coffee, tea and metals, continue to constrain growth. Higher world oil prices are also adversely affecting near-term economic prospects in many countries, while improving them in others.

There are also a number of unfavorable developments that continue to hold growth below potential:

  • The HIV/AIDS epidemic, which the United Nations has estimated to have affected 24.5 million people or 8.6 percent of the adult population of sub-Saharan Africa at end-1999, is reducing the labor force, including in skilled occupations and key public services like education and health, and treatment costs are adding to budgetary pressures. Life expectancy is being shortened substantially, undermining savings, growth and the social fabric in many countries.

  • Armed conflicts have severely damaged economic activity in many countries.

  • The recent experience of Zimbabwe has shown how quickly monetary and fiscal policies can get out of control, with macroeconomic stability and investor confidence being lost as a result. The "land reform" program is having spillover effects on investor confidence in other countries of southern Africa.

Nevertheless, the evidence of recent experience is clear, that sound economic policies and political stability have strengthened growth performance in the countries of sub-Saharan Africa that have experienced them. Of course, formidable challenges remain and need to be addressed if countries are to reach their growth potential.

III. Economic Policies for Higher Investment and Growth2

Faster growth cannot be secured with the present level of private investment in sub-Saharan Africa, which remains well below that of other regions. The dearth of private investment may be attributed mainly to the perception and expectation by both domestic and foreign investors of high risk and low returns on capital. Reducing risk would improve the attractiveness of holding assets, and help to raise domestic savings as well as investment rates, and reverse capital flight. Among the most important objectives of economic policy should be the following:

  • Maintenance of macroeconomic stability. Governments should especially build on the progress that has been made in recent years to reduce budget deficits and thereby reduce the risk that unsustainable fiscal imbalances would result in arrears, default or higher taxes.

  • A more efficient tax system. Governments need to improve tax administration and enforcement in combination with steps to eliminate tax exemptions, resist pressures from special interest groups, and eliminate corrupt practices. By broadening the tax base, these steps should make it possible to raise revenue to support important expenditures, while lowering marginal tax rates.

  • Improved infrastructure. Serious infrastructure deficiencies, in transportation (ports, roads, railroads), communications, and power generation, remain in most economies in the region. Better allocation of public outlays, as well as opening these sectors to private investment, with appropriate supporting policies to foster competition, would improve infrastructure while limiting the budgetary burden.

  • Privatization of state-owned enterprises. Appropriately designed and regulated divestiture should improve efficiency, reduce burdens on the budget, eliminate political interference in decision-making, and provide incentives for more innovation and dynamism.

  • More investment in human capital. Additional focus on human capital formation is required, especially through shifting the structure of public spending in favor of better delivery of primary education and health-care and other social services.

  • Strong financial systems. Policies to better mobilize savings and enhance financial intermediation should encompass appropriate independence of the central bank from the government; more effective regulation and supervision of the banking system; recapitalization or liquidation of problem banks; and the fostering of a competitive commercial banking system with foreign bank participation.

  • Realistic exchange rate. Overall production and exports are hurt by an overvalued currency, which inhibits economic diversification and resilience to future external shocks.

  • Openness to international trade. Several studies have shown how exchange and trade liberalization have improved the growth performance of countries in the region.3 A number of regional organizations are implementing arrangements to promote intraregional trade liberalization, including through lower import duties and simplification of the tariff structure.

  • Regional integration. This will help countries to overcome the disadvantages of their relatively small economic size, and enhance their ability to trade globally.

IV. Governance and Related Issues

The importance of better governance for growth and equity is being increasingly recognized by sub-Saharan African governments; the IMF strongly supports this trend. In particular, actions to address governance issues could well encourage private investment by reducing the perceptions of high risk and low returns on capital and help overcome the problems identified in the preceding section. Many countries have initiated measures that are already contributing to better economic performance and poverty reduction, but further broadening and deepening of these actions are clearly needed. Some examples:

  • Transparency and accountability in public sector resource management. Kenya has put in place a code of conduct for key public sector staff, and strengthened the Office of the Controller and Auditor-General. Mozambique has begun to publish quarterly budget execution reports.

  • Sound and efficient civil service and legal frameworks. Zambia is reducing the public sector workforce partly by retrenchment and containing public sector wage rates, so as to increase public investment and social programs. Cameroon is moving to improve the performance of the judiciary by strengthening its human and financial resources and publishing court decisions.

  • Measures to eliminate corruption. Uganda is implementing an anti-corruption action plan through the recently established Ministry of Ethics and Integrity. Tanzania has adopted a National Anti-Corruption Strategy and Action Plan. Nigeria has passed anti-corruption legislation and established an independent commission to implement its provisions; taken steps to recover misappropriated official property from abroad and prosecuted wrongdoers; and is reviewing its anti-money laundering act and compliance with the OECD anti-bribery convention.

V. Role of the IMF

The IMF has, over the years, stressed the importance of macroeconomic stability as a precondition for growth and poverty reduction--and this will remain the primary focus of the Fund's advice. But, at the same time the Fund has increasingly worked to ensure that social policies are integrated into IMF-supported programs and policy advice, looking to the World Bank to take the lead in giving advice on detailed poverty reduction and social measures.

Much remains to be done to strengthen antipoverty initiatives but efforts are underway in a number of countries, focussed on social safety nets and better targeted public spending on education and health. In Malawi, for example, as part of an expanded and targeted social safety net, seeds and fertilizer are provided to the poor. In Mozambique, targets were established and met for the number of vulnerable people to be shielded by social safety nets. In Ghana, efforts to protect vulnerable groups emphasized community initiatives, food-for-work programs, training and placement for retrenched public sector workers, and the provision of basic needs such as hand-dug wells, low-cost sanitation, essential drugs, and supplemental feeding. A recent review of data on government spending on education and health revealed that such spending continued to grow in countries with IMF-supported programs, both in real terms and as a share of GDP. Social indicators improved, including lower illiteracy rates, higher primary and secondary school enrollment rates, especially for girls, reduced infant and child mortality, better access to health care, and greater prevalence of immunization.4

Social policies form one element in economic policy strategies needed to promote faster poverty reduction, along with other structural policies, and macroeconomic policies. All these elements form part of the policy programs being supported by IMF financing under the concessional PRGF in more than 20 of the 41 sub-Saharan African countries that are eligible for such assistance. A further substantial number of new PRGF programs are expected to be initiated in the remaining months of 2000 and during 2001, as more countries complete the process of preparing their poverty reduction strategy papers. Key elements of most existing programs include the following:

  • With respect to poverty diagnostics, while the quality of data has been variable, countries concerned have been able to provide estimates of poverty that give a concrete sense of the order of magnitude of the problem. Countries have also developed indicators to monitor progress in poverty reduction.

  • Countries are identifying structural reforms that promise a direct impact on poverty reduction. Generally, these relate to social sectors, institutional reform in the public sector, infrastructure, and agriculture.

  • More is also being learned about how to strengthen participatory processes and incorporate a broader range of views of stakeholders into programs.

In parallel with the PRGF approach, the IMF is participating in a strengthening of official debt relief for eligible countries that adopt poverty-reduction strategies, which was adopted by the international community in September 1999. The enhanced HIPC initiative, for which more than 30 sub-Saharan African countries are eligible, is designed to provide faster, deeper, and broader debt relief and strengthen the links between debt relief and poverty reduction. It is supported by other official and private creditors, notably the World Bank, with which the IMF is cooperating extremely closely in this initiative.

In the first year, the pace of implementation of the enhanced HIPC initiative was slower than originally expected, because of delays in the adoption of poverty-reduction strategies. These delays have occurred partly because of armed conflicts, political unrest and governance problems. But delays also occurred because countries needed time under the new approach to formulate their own poverty-reduction strategies in a participatory process and to put in place appropriate policies. Progress is being advanced by the Joint Bank-Fund Implementation Committee. As of November 30, 2000, 12 countries, of which 9 are in sub-Saharan Africa, have received commitments of debt relief from the international community under the enhanced HIPC initiative, subject to the successful implementation of programs supported by PRGF arrangements. An additional 10 sub-Saharan African countries are expected to receive commitments of such support by end-2000, and most of the remainder of the 32 sub-Saharan African countries that are eligible by end-2001.

The IMF is intensifying its technical assistance and training programs to support capacity building and institutional reform, including improving statistics to conform with international data dissemination standards, as well as to observe best practices in fiscal transparency and banking supervision. Comprehensive integrated multi-year technical assistance programs, co-financed with other donors, have been agreed with Malawi, Nigeria, and Rwanda. The IMF is expanding its training efforts for African officials, focussed on courses at the Joint Africa Institute that was opened in Côte d'Ivoire in late 1999. The IMF Institute is also committed to continue its regional training activities.

In addition to its main instrument of lending to sub-Saharan Africa, the concessional PRGF, the IMF will be ready to provide stand-by and extended arrangements for countries ineligible for concessional financing, including a precautionary stand-by program approved in August 2000 for Nigeria, and emergency post-conflict assistance to help countries rebuild their infrastructure and institutional capacity; programs supported by the latter form of assistance have recently been approved for the Republic of Congo (November 2000) and Guinea-Bissau (January 2000) and are under consideration for Burundi and Eritrea.

Sub-Saharan Africa also needs better access to the markets of the advanced economies. Impediments that hamper market access include high import duties, quantitative restrictions on trade, and subsidies for local producers. Sectors where African countries can probably realize a competitive advantage from freer trade include raw and processed agricultural goods, textiles and garments. Improved access to advanced country markets in other sectors would also facilitate export diversification in the region.


Box 1. Poverty Reduction Strategies and Debt Relief in IMF-Supported Programs

The objectives of the Poverty Reduction and Growth Facility (PRGF), the IMF's new concessional lending facility, explicitly make poverty reduction the central objective of policy. Under the PRGF, countries devise medium-term policy frameworks that contain specific poverty-reducing strategies. The IMF relies on the World Bank and other multilateral and regional development banks to assess public spending priorities and their costing, and then helps to ensure that outlays are consistent with the available financing.

The design and monitoring of poverty reduction strategies must include a participatory process involving civil society. This should bring benefits such as broad-based agreement within the country on priority goals, public services that reflect the needs of the poor, and better government accountability. There should be better availability of qualitative and quantitative indicators of poverty, as countries improve their statistical base.

There will be a shift to more pro-poor spending and service delivery in public expenditure programs. This should translate into higher outlays on primary education, health, and rural infrastructure. There should be more systematic analysis of the social and distributional impact of macroeconomic and structural policies before these policies are put in place to help the design and effective implementation of social safety nets.

Greater attention will be paid to monitorable poverty-reduction results. This will require the selection and tracking of key outcome indicators, with the associated required institutional capacity. There should be more ex post evaluation of the impact of reforms on poverty, with results fed into new policymaking. There will be greater emphasis on transparency and governance.

The relationship between countries and external partners will change in a number of ways. This includes respecting country ownership by basing the IMF's financial support on country strategies, and recognizing the benefits of country ownership by showing more flexibility with regard to the content of programs.

The new approach includes deeper, faster, and broader debt relief for the heavily indebted poor countries. The enhanced initiative makes country formulation of a PRSP an integral part of the process in order to closely link poverty reduction and debt relief. Debt forgiveness can be effective in helping to reduce poverty only if it is provided in the context of strong policy programs aimed at poverty reduction. More and better targeted aid flows, and improved access to industrial country markets, would also greatly enhance the prospects for poor countries.


Box 2. South Africa

South Africa has been following in recent years a market-oriented approach to economic development that has been characterized by the pursuit of sound fiscal and monetary policies, substantial progress in trade liberalization, and the maintenance of a healthy and robust financial system. This approach helped South Africa to withstand contagion from the emerging markets crises of 1997-98, with relatively little economic dislocation. Since then, South Africa has experienced a modest economic recovery, which has been export-led, fuelled by the expansion in world output and improvements in external competitiveness. Although the political and economic crisis in Zimbabwe appears to be adversely affecting business confidence and real growth in 2000, a pickup in activity is expected in 2001.

Progress in strengthening the public finances over the last few years has been impressive; the overall deficit of the national government has been reduced substantially as a percent of GDP since 1992/93. At the same time, fiscal expenditures have been reprioritized toward the social sectors (education, health, and welfare) and strong improvements have been made in the efficiency of tax administration.

Reflecting the Reserve Bank's firm monetary policy, core inflation has fallen considerably during the 1990s--from 18 percent in 1991 to 8 percent in 1999. A formal inflation targetting framework has recently been adopted with the objective of reducing inflation further to 3-6 percent by 2002.

Over the medium term, South Africa needs to increase its potential growth rate from an average of 3-4 percent in recent years to above 6 percent, in order to help address its problems of high unemployment, poverty and extreme inequality in the distribution of income. It needs to build on the progress made towards macroeconomic stability by implementing faster structural reforms, particularly in the labor market and privatization areas. This should encourage the growth of foreign and domestic investment that is necessary to put South Africa on a higher economic growth trajectory. Furthermore, robust growth in South Africa would have a strong catalytic effect on the economies of the rest of the region.

Trade liberalization has been an important factor contributing to South Africa's improved economic performance in recent years. The latest step in this process was the implementation, effective in September 2000, of the 14-member Southern African Development Community (SADC) trade agreement, although this will fall short of establishing completely free trade throughout the region. South Africa offered to reduce its tariffs under this agreement at a faster speed than its partners.


Box 3. Nigeria

The IMF approved in August 2000 a Stand-By credit for Nigeria of SDR 789 million (about US$1.0 billion) to support the government's economic program for 2000-01. The Nigerian authorities will treat the Stand-By credit as precautionary and do not intend to make drawings at this time.

The democratically elected government that took office in May 1999 adopted policies to restore macroeconomic stability, liberalize the exchange rate regime, and combat corruption. Measures to restore fiscal discipline included a freeze of payments on extra-budgetary commitments, a suspension of capital spending, and the cancellation of oil concessions. Exchange market pressures abated, inflation moved sharply down following a tightening of monetary policy, and, assisted by higher oil revenue, a precipitous drop in gross international reserves was reversed. However, signs of sustained economic recovery and a resurgence of private investment are yet to emerge.

Nigeria's medium-term external payments position will probably remain difficult. Oil and gas exports are insufficient to finance the non-oil external current account deficit, particularly since the country nets only about one-half of its gross oil receipts, and little of its natural gas exports receipts, because of generous tax concessions. Moreover, if Nigeria's debt to the Paris Club were to be rescheduled only on non-concessional terms, external debt service would exceed 30 percent of exports of goods and services over the medium term.

For Nigeria's economic situation to improve rapidly, strict financial discipline will need to be supported by market-based reforms and debt relief. Priorities in the structural area include privatization, the reduction and rationalization of the tariff structure, and a strengthening of essential infrastructure. Without these measures, returns on capital would remain insufficient to finance needed increases in investment, and the external current account deficit would persist at a high level. And external current account deficits might prove unsustainable, unless debt relief can be obtained on more generous terms.

In order to achieve a sustainable increase in per capita income and a sizable reduction in poverty, the authorities will also need to greatly improve governance and institutional capacity and to strengthen social programs. Strong action is being taken to tackle corruption; contracts awarded by the previous government have been reviewed, and in some cases revoked, determined efforts have been made to recover stolen funds held in foreign bank accounts, and anti-corruption legislation has been passed. Petroleum subsidies have recently been reduced, thereby freeing budgetary resources for poverty alleviation.


Box 4. Cases of Sustained Adjustment in Africa

Botswana has been among the world's best performing developing economies. Per capita output growth of more than seven percent a year has allowed Botswana to develop from one of the world's poorest countries at its independence in 1966 to a middle-income country today, with per capita income well above the sub-Saharan Africa average. Factors contributing to this long-run success include prudent monetary and fiscal policies, the efficient exploitation of mineral resources and the use of those resources to boost investment in infrastructure and social services, such as education and health, and a democratically elected government.

Cameroon embarked on a comprehensive structural adjustment program in mid-1997, following a decade-long recession characterized by widespread and worsening poverty, collapsing infrastructure, large external and domestic arrears, and endemic corruption. Priority was given to macroeconomic stabilization, normalization of relations with creditors, and capacity building. Public finance reforms centered on revamping the tax system, introducing a value-added tax, ensuring regular transfers of all oil revenue to the budget and improving expenditure management, with spending redirected toward the social sector. Structural reforms consisted of banking system rehabilitation, privatization including the national railways, a new regulatory framework for telecommunications, restructuring of the port sector and liberalization of the petroleum market. The program placed governance at the core of the reform agenda, especially the procurement system, the petroleum and forestry sectors, and public works.

Mali has built on competitiveness gains derived from the 1994 CFA franc devaluation, reducing macroeconomic imbalances and achieving more robust growth through the implementation of strong stabilization policies and broad-based structural reforms. The overall economic environment also benefited from the more streamlined regulatory and judicial framework, reforms in the financial and agriculture sectors especially cotton, and the privatization program. Progress in consolidating the government's financial position was achieved by judicious expenditure policy, while expanding access to primary health care and raising school enrollment, together with measures to expand the tax base, combat fraud and strengthen tax and customs administration.

Mozambique has made considerable progress since at least 1995 in dismantling the state-owned economy and adopting outward-looking and market-oriented economic policies. Structural reforms focussed on the shift toward market determination of prices, with the liberalization of the exchange rate and interest rates and elimination of virtually all price controls and trade and exchange liberalization, with the removal of non-tariff barriers and exchange controls, lowering of the average import tariff and elimination of most export taxes. Fiscal reforms included civil service reform, simplification and restructuring of the tax system, and improved expenditure management, while raising the actual delivery of health and education in real terms. Private sector development has been fostered by reducing administrative barriers to trade and investment, legal and judicial reform to increase economic security, and financial sector reform to develop money markets and indirect instruments of monetary policy.

Rwanda achieved strong economic performance in the aftermath of the war and genocide of 1994. The recovery process was helped by well-managed fiscal policies that provided the basis for early reconstruction efforts aimed at resettling returning refugees and displaced persons, helping the victims of the genocide, demobilizing soldiers, restoring internal security and strengthening the judicial system. The economy was opened up, as external tariffs were progressively reduced and a new simplified tariff structure became effective. The coffee export tax was eliminated and the producer price for tea was increased. Reform of the civil service was effected by adopting a new pay structure and increasing wages. An ambitious privatization program was undertaken and a one-step center was opened to promote private investment. New commercial banking legislation was introduced.

Tanzania began in the mid-1980s a decisive shift away from government control and ownership of the economy. By 1995, the exchange and trade system and the financial system had been liberalized; price controls has been eliminated; and a major privatization program had begun. Macroeconomic performance during 

1996-99 was generally good, based on strong fiscal policies; the cash budgetary management system helped to contain public expenditure. Substantial progress was made with structural reforms, including major tax reforms, a comprehensive framework for monetary management and financial sector development. Civil service reform led to rationalization and retrenchment and the initiation of pay reform. The petroleum sector was fully liberalized and subsidies eliminated. The government has focussed its efforts to improve its governance record and begun to develop sectoral anticorruption plans.

Uganda has achieved notable success over the past decade in sustaining high rates of economic growth in a low inflation environment, and has made considerable progress in poverty reduction, through the adoption of prudent fiscal and monetary policies and structural reforms. The economy has become increasingly open; all import bans have been lifted and the level and dispersion of import tariffs has been reduced. Trade liberalization has been promoted by shifting the fiscal revenue base away from taxes on external trade toward taxes on domestic value added and incomes. The elimination of the monopoly of the state-owned coffee marketing board was a key element in the reduction of the incidence of poverty. Fiscal expenditures on health, agriculture, roads, water and sanitation have increased in recent years, both in relation to GDP and to total central government budgetary expenditure. Efforts to reduce the spread of HIV/AIDS have been highly effective.

Table 1. Sub-Saharan Africa: Macroeconomic Developments and Projections, 1982 2001

Real GDP growth (in percent) 2.0 0.5 3.7 2.1 3.3 4.3
Real GDP per capita growth
  (in percent)
-1.0 -2.0 1.2 -0.4 0.7 1.5
Inflation (in percent) 22.9 54.8 26.2 14.9 16.1 10.6
Private fixed capital formation
  (in percent of GDP)
-- 11.8 11.8 11.4 11.0 11.9
Public sector balance excluding grants
   (in percent of GDP)
-6.8 -8.1 -4.8 -4.8 -2.4 -3.0
External public debt (in percent of GDP) -- 50.9 51.2 53.9 51.0 49.8
External public debt (in billions of U.S. dollars) -- 151.1 169.0 174.7 168.4 169.9
Terms of trade (1990 = 100) -- 96.6 99.4 104.2 104.2 100.3

Sources: World Economic Outlook, October 2000.


Table 2. Sub-Saharan Africa: Real Gross Domestic Product
Growth Rates of Strong Performers, 1982-2001


Botswana 10.8   4.0 6.3 7.3 8.5 7.1
Cameroon 1.3 -3.1 4.6 4.4 4.2 5.3
Mali 2.1 1.8 4.7 1.1 3.8 5.6
Mozambique 0.1 3.2 8.6 8.8 6.1 10.4  
Rwanda 1.5 -13.9    17.7   5.9 5.0 6.0
Tanzania 3.4 1.4 3.7 4.6 5.2 5.6
Uganda 3.4 4.8 7.2 7.8 5.0 6.1
Average 2.4 0.0 6.4 5.9 5.3 6.4
Sub-Saharan Africa average 2.0 0.5 3.7 2.1 3.3 4.3

Sources: World Economic Outlook, October 2000.

1See IMF Factsheets "The IMF's Poverty Reduction and Growth Facility (PRGF)", September 2000, cts/prgf.htm and "Debt Initiative for the Heavily Indebted Poor Countries (HIPCs)", September 2000, htm , and IMF Issues Brief on "The Logic of Debt Relief for the Poorest Countries", September 2000,
2See Anupam Basu, Evangelos A. Calamitsis and Dhaneshwar Ghura, "Promoting Growth in Sub-Saharan Africa: Learning What Works," August 2000, Economic Issues Brief, Number 23; Ernesto Hernández-Catá, "Raising Growth and Investment in sub-Saharan Africa; What Can Be Done?," 2000, IMF Policy Discussion Paper, PDP/00/4; and in the IMF "World Economic Outlook" of October 1999, Chapter VI "Growth in Sub-Saharan Africa: Performance, Impediments and Policy Requirements."
3See Arvind Subramaniam and others, "Trade and Trade Policies in Eastern and Southern Africa," 2000, IMF Occasional Paper 196, and Jeffrey Sachs and Andrew Warner "Economic Reform and The Process of Global Integration", Brookings Papers on Economic Activity, Number 1, 1995.
4See Sanjeev Gupta and others, "Social Issues in IMF-Supported Programs," 2000, IMF Occasional Paper 191.