Burkina Faso and the IMF
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A Partnership for Growth and Poverty Reduction in Africa
Remarks by Rodrigo de Rato
Managing Director of the International Monetary Fund
At the Extraordinary Summit of the African Union
Ouagadougou, September 8, 2004
Ladies and Gentlemen:
1. I am grateful to President Compaoré for inviting me to the African Union's Extraordinary Summit on Employment and Poverty Alleviation in Africa. This is my second visit to Africa as Managing Director of the IMF. These two visits have taken me to Nigeria, Gabon, Uganda, South Africa, and now Burkina Faso, and I have been able to exchange views with a wide variety of leaders of government, as well as representatives of parliaments, the private sector, and civil society. I greatly value these opportunities to listen first-hand to your views and advice. Job creation is a key objective of the economic programs that the IMF supports in Africa — and essential to successfully fighting poverty.
2. The IMF shares the strong commitment in Africa to tackle the challenges of growth and poverty reduction. Our common frame of reference is provided by the Millennium Development Goals. These reflect the ambitious and universal commitment by Africa and the international community to address these challenges. The strategy is one of partnership, agreed at the United Nations Conference on Financing for Development in Monterrey in 2002, recognizing that successfully fighting poverty requires efforts from developing and industrial countries alike. Sound economic policies and good governance in developing countries are to be matched by more effective support from the international community—both through overseas development assistance and through more open trade policies. In Africa, the New Partnership for African Development (NEPAD) formulated by Africa's leaders rests on the same foundation. The IMF is committed to be a strong partner in these global and regional efforts.
3. The past decade has witnessed progress in macroeconomic stabilization in many countries in Africa. But this progress—welcome as it is—has remained too modest to make serious inroads in combating poverty across the continent. The challenge—our common challenge—is to find ways to build on the foundation of macroeconomic stability: to build a future with more growth, employment, and higher living standards, and less poverty and deprivation. Drawing on my meeting with African governors shortly before my appointment as Managing Director of the IMF, and the valuable discussions I have had during my first two trips to Africa, allow me to share with you my reflections on the way forward for Africa and the role that the IMF can play in assisting you on this road.
4. Successful poverty reduction requires sustained high levels of economic growth. Economic growth, in turn, is driven by a variety of factors, not all economic, including a healthy and well-educated population that can pursue its economic and social activities in an environment free of conflict and strife. This is reflected well in the insightful report of the World Commission on the Social Dimension of Globalization, chaired by Presidents Mkapa of Tanzania and Halonen of Finland. In my view, seizing the opportunities of globalization and successfully combating poverty requires effective partnerships: between rich countries and poor countries, as well as between governments, civil society, and the private sector.
5. For Africa, the key economic priority is to raise economic growth in the face of inevitable domestic and global shocks. High and sustained levels of economic growth require a vibrant private sector, with high levels of investment from domestic as well as foreign sources. And experience in Africa and elsewhere shows that a healthy business and investment climate requires first and foremost sound institutions that provide and enforce a predictable legal and regulatory framework. Higher inflows of foreign assistance are essential as the international community scales up its efforts to reach the Millennium Development Goals, in particular to address Africa's health crises, including HIV/AIDS. It will be important that African countries are well-prepared, and that public expenditure management systems are reinforced to ensure that other essential spending, including on much-needed public infrastructure, is not crowded out. The IMF will ensure that its programs and policy advice are fully supportive of higher levels of aid.
6. Let me elaborate on these points for those countries rich in natural resources where the blessing of mineral wealth has often been undermined by poor policies. A key priority for them is to avoid boom-bust cycles as oil prices rise and fall. This will require that much of the revenue windfall from high prices be saved and incorporated into a medium-term fiscal framework aimed at achieving fiscal and debt sustainability. The Fund stands ready to support such efforts of all counties in the region.
7. The advanced economies have a dual task. First, to improve access to their markets for developing country exports and dismantle trade-distorting subsidies. And second, to boost their overseas development assistance. The framework agreements reached at the WTO last July are welcome and place the Doha Round back on track. What is required now is determination and commitment by all countries to deliver on the goals of the Doha Development Agenda. Both rich and poor countries carry responsibilities in promoting the fuller integration of developing countries into the global trading system, and we must also recognize that trade barriers in and among many developing countries themselves remain too high. But in addition, greater trading opportunities need to be accompanied by higher levels of aid—provided as far as possible on grant terms. Moreover, current aid flows are not only insufficient, they are also unpredictable and often uncoordinated among donors. Better aid coordination and multi-year commitments are key steps in making development assistance more effective.
8. The IMF is committed to assist its African members in tackling the challenges they face. A process of reflection is currently underway assessing the IMF's work with all its low-income members. Rest assured that the intention is to remain engaged over the long term. The objective is to find ways in which the IMF can play its role more effectively. Some efforts are already underway: I believe that the poverty reduction strategy process, with its emphasis on ownership and participation, carries significant promise and should be continued and reinforced. But where the current instruments of the IMF are inadequate, new approaches need to be considered to achieve our shared objectives of growth and poverty reduction in Africa. Discussions are still at an early stage, and I very much welcome the participation of Africa in this process, as reflected in the two meetings held over the past year in Dar es Salaam and Dakar.
9. I see three areas of particular priority for the IMF:
· First, to make IMF financial assistance more flexible and responsive. We have taken some steps, for example through the recently-adopted Trade Integration Mechanism, which provides rapid support in case of countries facing prospective trade shocks resulting from liberalization under the Doha Round. A more generalized mechanism to tackle economic shocks within our programs with low-income countries will be discussed shortly. And work is currently underway within the IMF and with other multilateral and bilateral creditors to assess the state of the debt relief under the Highly Indebted Poor Countries initiative. Going forward, I believe the dual objective must be to ensure effective debt relief in those countries where it has not yet been achieved, while avoiding a further build-up of unsustainable debt in the future.
· Second, to sharpen our role in countries that do not need our financial assistance. Timely and high-quality policy advice, as well as technical assistance and capacity-building, will become increasingly important. In addition, I see the need to explore ways in which the IMF can continue to assist its African members by assessing and signaling good economic performance outside of traditional program relationships involving financing. This issue will be discussed at the IMF's Executive Board before the end of this year.
· Finally, to reinforce our analysis and assistance in support of Africa's regional integration initiatives, which African leaders themselves identified as a key engine for growth at the recent summit of the African Union in Addis Ababa. Regional integration, by providing important peer review mechanisms, can play a valuable role in promoting sound macroeconomic policies and a good investment climate. We are tailoring our work to support this objective, including by conducting regular surveillance discussions at the regional level in Africa.
10. Harnessing Africa's immense potential is a global priority for the 21st century. The African Union, with its vision of economic integration across the continent, will surely play a pivotal role in this effort. Rest assured that the IMF will stand by you to assist you in this historic endeavor.
IMF EXTERNAL RELATIONS DEPARTMENT