Transcript of a Press Conference of African Finance Ministers
April 22, 2006Washington, D.C., April 22, 2006
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MS. HARDIN: Good morning, and welcome to this press briefing with African finance ministers.
I am Frances Hardin, and I am one of the senior press officers here at the International Monetary Fund.
It is my pleasure to introduce our distinguished panel. Starting to my immediate right, the honorable Abdoulaye Diop, Minister of Economy, Finance, and Planning for Senegal; to his right, the honorable Jean-Claude Masangu Mulongo, Governor of the Central Bank of Congo; to his right, the honorable Baledzi Gaolathe, Minister of Finance and Development Planning for Botswana; and finally, the honorable Antoinette Sayeh, Minister of Finance of Liberia.
We will begin with brief statements from each minister, and then we'll take questions.
Who would like to go first, please?
MR. DIOP [INTERPRETED FROM FRENCH]: Thank you very much. Good morning, ladies and gentlemen.
I think that during the Annual and Spring Meetings, traditionally, the Governors meet with the press and answer questions from the press. This year, as during the last two years, we have witnessed rather significant growth rates in Africa that we have never seen before. That has made it possible to achieve rates of 5 percent, and the prospects for this year are of maybe even over 5 percent according to IMF projections, at a time when the IMF and the World Bank are at a crossroads because their Medium-Term Strategies are being developed and being proposed by the staff of both organizations. We may have a chance to review the position of the African and especially French-speaking countries of Africa and their reaction to these various strategies.
This is a time when countries such as ours, Senegal, are in the process of kicking off some new programs with the IMF, specifically, the support instrument to the economic policy which is a little different from what was in existence. At a time when we are benefiting from debt forgiveness, there is also a question of debt relief for some other countries, and we may go back to that issue in greater detail. And of course, I am here to talk to you about both my country, Senegal, and the West African Economic Union, which is an economic union of eight countries that have a common currency, economic and monetary policies that are also common, and I might talk about some initiatives that are being developed within the West African Economic and Monetary Union.
That is what I wanted to say, and obviously, I will be answering whatever questions you may have dealing either with Senegal, West Africa, or for the French-speaking countries in the IMF and the World Bank.
MS. HARDIN: Thank you
MR. MULONGO [INTERPRETED FROM FRENCH]: Thank you very much.
I believe that the Minister of Senegal has mentioned the different issues that we will be discussing here together this morning. As far as I am concerned, I come from the Democratic Republic of Congo, and I'll speak a little bit about what is being done in my country.
MS. HARDIN: Thank you.
Please, Mr. Gaolathe?
MR. GAOLATHE: Thank you very much, Madam Chairperson.
I am from Botswana, Minister of Finance and Development Planning of Botswana. Currently Botswana is also chairing SADC, and as Minister of Finance and Development Planning in Botswana, I am the current chairperson of the Council of Ministers of SADC.
In terms of membership of the IMF and the World Bank, I of course belong to a group of African countries, Group I of the African countries, some 23 or so countries, which use English as the international language, although we do have several languages of our own, but we found that we ended up using that one as lingua franca.
Most of our countries have their financial years starting April 1, and obviously, we are at the very beginning of a new financial year, and like many countries in Africa, talking about Botswana and SADC, we have many development challenges that we are confronting, and we are looking at the IMF and the World Bank, among other international cooperating partners, as institutions that can help to complement or supplement our development efforts. I will go deeper as questions are asked.
Thank you very much.
MS. HARDIN: Thank you.
MS. SAYEH: Thank you very much.
I am very pleased to be here in this press conference today, very pleased to be able to participate along with my colleagues in discussing some of the issues that were already flagged, but also from the perspective of myself as a finance minister of a country emerging from many years of conflict and seeking to reestablish our relationships with the international community, in particular with the multilateral institutions, including the Fund, and getting ourselves a track record that we hope will position us in the not-too-distant future to benefit from debt relief from the multilateral institutions.
As many of you know, Liberia is just emerging from 17 years of very brutal conflict, and the new Government is entering its third month this month. I am entering my second month as Minister of Finance, having recently left the World Bank, and am now dealing with issues from a very different perspective.
Liberia is a devastated place, is a broken economy in many, many ways. We are in the process of discussing with the Fund in particular a program that will help us to re-establish basic financial management institutions and to get control over our expenditures and revenues in a way that there has not been for many, many years.
Liberia has accumulated significant arrears to the international community as well as a high level of domestic arrears as well that we expect to start addressing in the first instance through a staff-monitored program that the IMF Board will be considering just this coming Wednesday, actually, and down the road to position ourselves for a fully Fund-supported program that will lead us to the HIPC Initiative and ultimately to the MDRI.
But we are just starting, and it is a very, very ambitious agenda that our President, Ellen Johnson-Surleaf, has set for ourselves. Expectations are very high in Liberia for what the Government can delivery in the very short run, and to help to focus ourselves in the first several months and first few months, we have just issued, as some of you may have seen, a 150-day Action Plan that indicates some of the policy measures the Government is taking to put us back on the road to economic recovery and some of the initial investments that we want to put in place to show people that their lives are improving in the very short run.
So that document is available on our website, and we look forward to discussing the Liberian challenges as well as the relationships that post-conflict countries like ourselves have with institutions like the Fund.
Thank you very much.
MS. HARDIN: Thank you.
We'll now take your questions, please.
Please, when I call upon you, will you give your name and your news organization or your affiliation? Thank you.
Over here, please.
QUESTION: Thank you very much.
My name is Manelisi Dubase from the South African Broadcasting Corporation. I have two question for Minister Gaolethe.
The first question, Minister, is how does the chaotic economic situation in Zimbabwe affect your whole region, and have you ever thought, as a region, to intervene economically to save the country and the people of Zimbabwe? That is one.
Secondly, when would you ultimately establish the free trade zone in the SADC Region? I realize that when you have to go to Angola from South Africa and Botswana, you still need a visa and all sorts of other barriers. When are you going to limit all these trade barriers and start trading as a bloc, as a zone?
MR. GAOLETHE: Thank you very much.
Firstly, yes, Zimbabwe is very much a member of SADC, and as such is a signatory to the Regional Indicative Strategic Development Plan. Within that Plan, there are many things that, as a Region, we will want to achieve. You are aware that there are a number of protocols that have been signed, and the members are going to strive to meet those.
This coming week, we will be having a conference in Namibia, an international consultative conference with our international cooperating partners. At that meeting, we will be sharing our views and seeking support in our various programs.
Now, specifically, how this situation in Zimbabwe is affecting the progress of the Region, obviously, if any member within SADC has economic or whatever other programs, all of us are affected, and therefore we have to work cooperatively to try to solve those.
In this respect, we will be asking our international cooperating partners to support Zimbabwe in its efforts to get out of the problems it is confronting now. Specifically, because we are in the IMF, you are aware that dialogue is always in the process of opening. I think Zimbabwe was having a problem of arrears which they have now sorted out. It is our hope that in the coming months, the two sides will make some progress, because one of the hindrances to recovery for Zimbabwe is a shortage of foreign exchange, balance of payments problems, where IMF can play a major role.
It is our hope that given that Zimbabwe is now up-to-date with its payments, there will be progress in that regard. But at the end of the day, all of our countries have got to work hard in asking the international community to supplement or complement what we are already doing.
With regard to whether we shall reach free trade status within the SADC Region, as you know, in terms of the trade protocol, we should reach free trade status by 2008, and by 2011, we should have reached Customs Union status where we shall have a common tariff. And beyond that, we should be working toward a common market. When we reach that stage, there should be a freer movement of labor across the Region. At the moment, although this has been removed, there is generally free movement of people, but we see they have their work permits and the like.
So we are moving in that direction, and by 2008, free trade status should be achieved. You are aware that within SADC, several countries are already at a Customs Union stage, and what we are saying is that the others should approach that.
Thank you very much.
MS. HARDIN: Thank you.
The gentleman back here, please.
QUESTION: Thank you very much.
My names is James Batri, Voice of America.
To the Minister from Senegal, where are we in terms of a common currency for the West African Region and the impact on trade in the Region?
And, to the Minister from Liberia, where does domestic revenue collection fit into your 150-day plan?
And, if I may add to the Minister from Liberia, would you comment also on taxes and what you are doing to collect taxes?
MR. DIOP [INTERPRETED FROM FRENCH]: Thank you very much.
I will speak in French, and people should have a minute to put on their earphones.
As to the West African common currency, that's a project that is on-going, but let me explain to you what's happening right now. There are eight French-speaking countries that have a common currency that is called the CFA, and there are seven other countries that belong to WAEMU that have a different currency.
The big country among them is Nigeria, which is the most important country, both from the point of view of the number of people it has and from the size of its economy, plus it is an oil-producing country.
The first eight countries who have a common currency and have had it for over 40 years have an Economic and Monetary Union that was established in 1994, because before that, it was simply a monetary union, but since 1994, it has been implementing common economic and financial policies. From the point of view of the currency, there are no problems. From the point of view of the economy, there are convergent agreements that have been reached and that need to be followed by the eight countries to bring their economies together as well as their currencies have been brought together. So from that point of view, we have no specific difficulties.
Now, between the two scenarios that I will describe, we have to figure out which is the best. One, would it be better for the other countries to set up a functional zone without any problems--I'm talking about Ghana and other countries that might wish to join our West African Economic and Monetary Union. We can do that, because Guinea-Bissau, which was not a member of the community, and Mali, which left the community but then rejoined it, have been able to do this. So that can be done. But the heads of state have preferred to ask the other grouping, which does not have a common currency--they have seven different currencies--to try to converge within CEDAO or ECOWAS and to create a common currency among five of the countries that will have to get closer and closer together for a while.
We have talked about 2009, but 2009 is upon us, and it might not be possible between now and 2009 for the second grouping to come up with a common currency, to adopt it, to have it operate properly, and then join the first group. So we believe that that other group, the second group, needs more time to get organized, say, over the next 10 years, although no fixed amount of time has been set, to make it possible for that group to have their own common currency.
The various scenarios of the past have been implemented, but we have not quite reached a decision on the establishment and integration of the second group with the first group to come up with a common currency over time.
In the zone, in the area, we have one group which is ECOWAS. It is an economic union with integration of economic policies, and I believe that a common currency will then make it possible to economically integrate the West African countries.
Now, the integration process in West Africa is one of the conditions for NEPAD. NEPAD will work with the Region as an autonomous area in developing common policies; secondly, negotiation with the European Union to develop partnership agreements will happen with the West African Region. So, by increasing our economic and monetary integration, there will be an area that will be clear and will be in a better position to negotiate different strategies and different agreements with the other international economic entities.
MS. Sayeh : Thank you for that question. Clearly, revenues are a big part of what we need to improve in Liberia. Collection of revenues has been in the recent past riddled with issues of corruption. Emerging from conflict, we have a very small tax base in Liberia, and in the short-term period of the 150-day program, our objective has been to plug those holes in the revenue system, clear, obviously holes in terms of import taxation, for example. We have implemented actions to make sure that the pre-shipment inspection of imports, a program put in place to address the issue of undervaluation of imports, and thus leakages of revenues from imports, is implemented fully, and we have made sure that it applies to petroleum and rice imports, which were the source of the two biggest leakages in the system. So that, we have done already.
We have also put in place a program to collect overdue taxes from the business community in Liberia. We have also done some work in terms of making sure that in the medium term, we start to address the bigger issues of the tax base, that are impeding the expansion of the tax base. But those measures are being put in place in the first instance in the context of the 150-day program, but clearly also as a key component of the staff-monitored program with the IMF.
Liberia, relative to the rest of this sub-region, has an import tariff structure that is relatively uncompetitive, so we want to also look at the structure of import taxation, because one has to balance the objectives of increasing revenue with those of also stimulating an economy emerging from conflict. So on that account, one needs to make sure that the levels of taxation are not going to impede economic activity. So that is also a challenge for us as we try to address leakages in the revenue stream.
Corruption, as you know, has been a major issue in Liberia, and corruption on the part of government officials as well as in the private sector when it comes to revenues. So we are also putting in place actions to bring to account people clearly involved in corruption. We have had to dismiss some staff in the Ministry of Finance that have been found, through various audits that we are carrying on, to be guilty of malfeasance, so we have tried to address that as well. And clearly, in the cases where there is clear evidence of business, private sector, involvement in corrupt practices, we are also addressing those.
But we look forward to outlining a more medium-term strategy for revenue collection as part of our broader-term
I-PRSP and poverty reduction strategy down the road. But in the very short term, in the 150-day program, our efforts have been to plug obvious leakages in the revenue stream, and we have already been successful in the first three months of the government in raising revenues by some 34 percent over a similar period last year. So we think that what we're doing is in the right direction.
MS. HARDIN: Thank you.
We have a question right here.
QUESTION [INTERPRETED FROM FRENCH]: Gabrielle Grenz, Agence France-Presse.
My question is for each one of the ministers. I would like to have your position on the IMF's reform project, that is, the whole plan for amending the quotas and the question on the transparency of choosing the Director General of the IMF. And it is for each one of the ministers.
MR. MULONGO [INTERPRETED FROM FRENCH]: On the question regarding the quotas, in general, the African countries are pleased with the initiative to increase the quotas and also to have different representation. Our continent, particularly Sub-Saharan Africa, has 45 countries, and all the countries are members of the IMF, and most of these countries have a program with the IMF. So the question of the quota represents a very important one. We have at the moment 5 percent, and we would like to have our share, once only, but only if those that are at a disadvantage can catch up.
As to the representation at the IMF, we have two seats only, and we are, as I said, about 45 countries who are members of the IMF, so we believe that these two seats are not enough for that number of countries, and that number of seats should also be increased--but not only the number of seats, but also the number of nationals from our countries as staff. There should be more members from our countries in higher-level staff positions. We believe that in this way, our continent will be better-represented.
So this is what I can say on behalf of the African countries on this point.
Regarding the question of transparency, I think I will leave that to the Minister of Senegal, who could answer that question more expansively.
I would like to add to the comment on quotas as well. It's true that the various shares do not represent the economic weight of each country. It is true that the Asian countries have greater weight than the amount of shares allotted to them at the moment and that there is a need to revisit the shares per region.
A strategy has been proposed on this. One is to increase as soon as possible the shares for the most under-represented country and then, in a second stage only, to undertake more changes, legal changes, to actually amend the by-laws of the IMF, which would allow for an increase in the African shares.
The African countries don't like that strategy, that two-step procedures. We prefer that the re-structuring of the shares be done in one, single time instead of first solving the problem of the underrepresented countries, the Asian countries, and then a change, an amendment, to the statutes to allow the African countries to increase their share.
We think that the whole thing should be done one, single time, so that, since we are the ones that contribute the most to the IMF's income and use most of the Fund's lending, we believe that we need to have broader representation within the IMF.
Now, it's true that the level of shares of our country is very low; so even if we settle the problem by increasing the number of shares and the number of representatives in the Board, I think we also need to be better represented amongst the management of the Bretton Woods Institutions, which is not the case. Even at the level of the committees that are thinking about the reform, we are under-represented. We think there needs to be more African representation there so that Africa can give its views on issues that are going to affect us directly.
Regarding the question of the choice of the Managing Director, I actually, quite honestly, have no problems with transparency. I think the system has been well-established. In all institutions, the majority always choose their leaders, and it is true that we are underrepresented, so what we would like to do is to have more influence in helping to choose the Managing Director, and I do think they have been more aware of the African problems. In fact, the first candidates focused on Africa. And I think what we need now is higher representation of Africa at the leadership level so as to have Africa's voice better represented.
MS. HARDIN: Does anybody else have a comment on that question?
MS. SAYEH: I don't have much to add to what has already been said. Clearly, we think that it is urgent to address issues of participation and voice and a possible quota increase. Even if there is none, we think that there are possibilities of addressing those issues without necessarily moving to a full quota increase.
On the issue of transparency, clearly the selection of the MD is something we certainly endorse. We think that the processes of selection of the heads of these important multilateral institutions should be as such as to comfort all member countries that this has been done in a way that takes into account, into consideration, the concerns of people outside the process. So we very much welcome whatever can be done to increase the transparency of the selection.
MS. HARDIN: Thank you.
MR. GAOLETHE: If I may just add to what my colleagues suggested, to say that really, on the MD, in Botswana, we believe in the principle of merit and that institutions of this nature, when they are looking for leadership, the most important criterion should be merit, that they should get the best person available at that point in time.
This has been done in the UN when there is selection of Secretary General. We look around--yes, we do take regional consideration into account. But I think here, just look at who are the people who are making the greatest contribution and to some extent not stress on merit and regional considerations. So we think that it should be--and there could be reform also in this area.
I agree with my colleagues that we need an increased voice in the IMF, the most important reason being that most of the activities of the IMF are in Africa. Many of our countries have programs with the IMF, and obviously, they ought to be involved in the governance of the institution. And when it comes to quotas, given that in terms of development, we are still as a region or as a continent lagging behind. There is no way in which we can increase our quotas substantially, either in monetarist terms or in terms of the trade that we are transacting with the rest of the world. Therefore, we ought to look at other considerations. Since we are the major beneficiaries, we should open the window a bit wider so that we are involved in decision-making.
After all, if you look at--there was a conference in Paris last year, where it was agreed the importance of alignment and harmonization and the importance of making sure that those who benefit from the facilities provided by the IMF, the World Bank, and other institutions should really be involved in decision-making and that they should not just be on the recipient end of the conditionalities.
Thank you very much.
MS. HARDIN: Thank you.
We have a question over here, please.
QUESTION: Gonzalo Vina from Bloomberg News.
Minister, I wonder, in light of the statement made by the G-7 yesterday, saying that lending is taking place at quite a high rate of interest by some countries to African nations--would you like to comment on this in light of the debt write-off we have had just what your views are and whether it is actually taking place?
MS. HARDIN: Who would like to begin? Perhaps Madam Sayeh?
MS. SAYEH: I can't say that I am familiar with the details of that issue, but clearly, there is no lending taking place to countries in our situation -in post-conflict countries- because clearly, with the debt over-hang that we suffer from and the knowledge that countries like ourselves would ultimately benefit from the HIPC Initiative, I think any lender that does that clearly has to be not paying attention to what is happening, because those new loans would get caught up in the debt reduction under HIPC. So I don't see that that's an issue in our particular context.
MS. HARDIN: Of the ministers who are here, I think Senegal and Congo have had debt relief. Perhaps you two could comment.
MR. DIOP [INTERPRETED FROM FRENCH]: I don't know what interest rates you are talking about. I did not follow the statement made by the G-7. But I do know that after the Debt Relief Initiative, the countries that benefited have an obligation to follow prudent laws in incurring debt. They must only incur soft loans. So the interest rate problem is not one for our countries at the moment.
As to other forms of development financing, interest rates are quite low for financing coming from the World Bank or the African Development Bank. However, I think that more often, our countries are going to have to borrow, and they must avoid commercial loans, they must try to obtain as much as possible concessional loans.
So I think that the question regarding interest rate at the moment does not apply to countries that have a program with the IMF and have benefited from the debt relief.
MR. MULONGO [INTERPRETED FROM FRENCH]: The interest rate problem is a problem with the debt sustainability. When you borrow too much, and the interest rates are very high, obviously, there is the risk that in the long run, one cannot reimburse the amount one borrowed. So it is very important to have a team of economists that can analyze the debt level each country can incur so that one can be prudent in borrowing, and when borrowing, the money should go into infrastructure investment so that when one is ready to reimburse, one can do so.
In our country, we had a debt of about $14 billion, and the entire debt was in arrears, so in spite of Congo's wealth, we were unable to repay the debt. So we participated in a program with the IMF, and we had access to the decision point which allowed us to have debt relief following loan terms.
With that program, we will reach a completion point. Once we have reached the completion point, we will then benefit from the G-8 initiative, that is, the forgiveness of our foreign debt. And once we achieve that completion point, in order to help countries that have achieved this completion point, we believe aid should be given that will be flexible enough that will allow the country to invest in infrastructure and help the country undertake structural reforms so that the economy can begin to produce the necessary wealth in order to pay off that debt and not fall into a trap of high debt again.
MS. HARDIN: We have time for one more question, and I'm sure the ministers will talk with you afterward.
The young lady in the front row, please.
QUESTION: Dr. Sayeh, the President of the World Bank mentioned your name two years ago regarding your strength and good will to go and help rebuild your country, Liberia.
[INTERPRETED FROM FRENCH]: This leads me to the question of immigrant capital. The President of the African Union Commission said last week at the State Department that Western countries swallow up the African immigrants that go to work in Western countries. What are you doing to bring back that brain drain, those intellectuals, back to your country?
MS. SAYEH: This is a very good question. For us in particular, much of the intellectual and technical capacity is outside of Liberia. As a result of the war, we have had of course most of our skilled citizens leave to find better opportunities abroad. And we very much want to encourage those who can to return to Liberia, and we are in the process of discussing programs to facilitate that return, programs that we are discussing with the International Organization for Migration, with the UNDP, with institutions like the Soros Foundation--all of that, hoping to supplement the salaries that people like that would be able to obtain by coming to Liberia.
But clearly, we also have to balance the fact that Liberia is not yet in the position to absorb large amounts of returning Liberians as well, and that the remittances from Liberians abroad have been a significant contribution over the past several years of war and are things that we still rely on economically. So I think there is a balance to be struck between wanting very much to encourage skilled Liberians to return and to use their skills to good effect in the reform program in Liberia and at the same time wanting to have them continue to send remittances and to contribute in that way as well.
MS. HARDIN: Thank you.
Anyone else? No.
If not, I would like to thank you all for coming, and we'll see you at our next press conference.