Senegal and the IMF
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Press Statement by IMF First Deputy Managing Director Anne O. Krueger at the Conclusion of a Visit to Senegal
"Good evening, ladies and gentlemen, and thank you for coming. I should like to make a brief opening statement; I will then be happy to take your questions.
"As you know, the principal purpose of my visit to Senegal has been to participate in the International Monetary Fund Seminar on Trade and Regional Integration. I spoke at the opening session of the seminar this morning, and the text of my remarks will shortly be available on the IMF's website.
"During my brief visit, I also had the opportunity to meet with the Prime Minister and the Finance Minister; and of course I met with Governor Banny both at the seminar and at the lunch for seminar participants. This morning I also had the chance to visit the GINNDI project that works to take children off the streets and reunite children with their families.
"I should like to thank the Senegalese authorities for their very gracious hospitality during my visit; I want also to thank Governor Banny and his colleagues for their help in facilitating the seminar.
"There is much of which the Senegalese authorities can be proud. Significant progress has been made towards achieving macroeconomic stability and, as you know, Senegal has reached the completion point under the HIPC initiative. It will be important in 2005 and beyond to consolidate the gains from macroeconomic adjustment.
"Poverty reduction is a high priority in Senegal, as it is in many African countries. It is an objective that the International Monetary Fund shares. As I noted in my remarks at the seminar earlier today, there is near-universal agreement that prolonged rapid growth is essential to achieve a lasting reduction of poverty and rising living standards. Macroeconomic stability is a precondition for high rates of growth. As more African countries have pursued economic reforms and set in place a stable macroeconomic framework, so we are beginning to see the fruits of those reforms, in terms of higher growth rates and falling inflation.
"But it is clear that Africa has the potential to do even better. There is no reason why African countries should not achieve the same economic results attained elsewhere in the world, where growth has accelerated and poverty reduced.
"Trade liberalization is central to the prospects for higher growth. No country has achieved rapid growth over a long period without opening up the economy to trade with the rest of the world. Those that have opened up, like Korea and Chile, have experienced higher rates of growth and significant poverty reduction.
"Multilateral liberalization, using the framework established at the end of the Second World War, is clearly the most desirable route. But policymakers, especially in developing countries, often underestimate the benefits to be had from unilateral liberalization. These are very substantial. Countries have much to gain by liberalizing without waiting for others to do so. Those that do lower their trade barriers unilaterally will gain even more from any subsequent round of multilateral liberalization. Without opening themselves to trade, countries will not achieve the maximum benefits attainable when multilateral liberalization does take place.
"Today's seminar focused particularly on trade and regional integration. Regional trade agreements can represent an important positive step towards full-scale liberalization—but only if they are undertaken in the context of lowering trade barriers generally. The danger is that regional trade agreements will harm the economic prospects of member countries by depriving producers of access to inputs at the lowest price possible and giving high cost producers an undue advantage that distorts price signals.
"There are important and significant obstacles to the growth of trade in Africa—high transport and shipping costs, cumbersome customs procedures and other bureaucratic hurdles. These have to be tackled to foster the growth of trade at both the regional and the global level as well as to achieve higher productivity in domestic activities.
"There are also concerns about the potential loss of revenues from tariffs. There will be a transition problem in some countries, but it will not be eased by delay and is anyway usually greatly overestimated. Switching from quantitative restrictions to tariffs helps, as do efforts to broaden the tax base and so make possible reductions in taxes across the board. And lower trade barriers are of themselves likely to stimulate growth and may help raise additional revenues for any given level of tariffs.
"The practical problems associated with implementing trade liberalization often cause policymakers to lose sight of the very large gains to be had. Higher growth rates will result from opening up economies further to trade. That will reduce poverty and raise living standards. It will also help developing countries to be full participants in the global economy—which will enhance both their own growth prospects and those of the world economy as a whole."
IMF EXTERNAL RELATIONS DEPARTMENT