Transcript of a Press Briefing on the Regional Economic Outlook: Sub-Saharan AfricaAbdouyale Bio-Tchané, Director, IMF Africa Department
Washington DC, April 13, 2007
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Abdoulaye Bio-Tchané Director, African Department
Benedicte Christensen, Deputy Director, African Department
Michael Nowak, Deputy Director, African Department
Siddharth Tiwari, Deputy Director, African Department
Gita Bhatt, Sr. External Releations Officer, External Relations Department
Ms. Bhatt: Good afternoon everyone, and welcome to this press briefing on the 2007 Regional Economic Outlook for Sub-Saharan Africa. I am Gita Bhatt from the External Relations Department. Let me introduce the speakers. We have Mr. Abdoulaye Bio-Tchane at the center, Director of the African Department. We also have Siddharth Tiwari to my immediate right, Ms. Benedicte Christensen, and Mr. Michael Nowak, all Deputy Directors of the African Department. Copies of the report are availabe at the back as well as the press release in both French and English. We also have simultaneous interpretation into French. Mr. Bio-Tchane will make brief remarks and then we will open the floor to questions.
Mr. Bio-Tchane: Welcome, ladies and gentlemen. Let me make a few comments on the report that we are going to release in a few hours after, obviously, making ourselves available for your questions. The most encouraging information, most encouraging point in this report is that, at 5.4 percent in 2006, economic growth in Sub-Saharan Africa was strong for the third year in a row. This is slightly below the rate of 6 percent that we had last year, largely because of temporary constraints to the extension of oil production in, obviously, oil-exporting countries, but it certainly demonstrates how robust economic growth in Sub-Saharan Africa is.
Another demonstration of this general economic vigor is that, in oil-importing countries, growth held at 5.3 percent, and in nearly half of these countries, almost 20 countries, this growth exceeded 5 percent. For 2007, we expect GDP growth for the region as a whole to rise to about 6 1/2 percent, mainly because of oil production, but also growth, as I just said, remained steady at about 5 percent in oil-importing countries.
Inflation also seems benign, despite the increase in oil prices. The average inflation rate across the region, except in Zimbabwe, of course, is expected to remain unchanged at about 7 percent and a full three quarters of Sub-Saharan African countries are having record inflation at less than 10 percent.
This favorable situation is, not of course, without downside risks. If, for instance, global imbalances and tighter monetary policies cause a decline in export demand, if nonfuel commodity prices fall by more than anticipated, or if oil prices continue to rise, the regional growth prospect could be more subdued. Of course, as you know, there are also political risks in the region and, of course, natural disasters could happen.
Also, while overall growth has been strong, meeting the MDGs still seem unlikely. To reduce poverty by 50 percent, the growth rate will need to be at least 1, perhaps 2 percent more, and social and other obstacles to meeting the non-income MDGs have not been addressed. Increased aid flows will likely help, but so far the scaling up aid promised is not materializing. So, though meeting the MDGs may be unlikely for most countries in Sub-Saharan Africa, some are forging ahead, and a good example I want to quote is Mozambique where, despite floods and higher petroleum prices, the country's economy is growing fast, at 8.5 percent last year. Thanks, also, to consistent prudent macroeconomic policies and forceful reforms, Mozambique between 1997 and 2003 reduced poverty from 69 percent to 54 percent, and is the only country where, amazingly, rural poverty has declined more than urban poverty.
Mozambique has also doubled the number of children in primary schools, reduced infant and maternal mortality, and have begun to provide ARV treatment for its citizens affected by HIV. Mozambique clearly demonstrates that, with enough political and economic leadership, remarkable progress can be achieved.
Let me go back again to the region as a whole and say that, first, African oil exporters have saved a significant amount of their windfall. This cautious stance is serving them well. It will also allow them in the next months or so to cautiously expand spending to priority expenditures as their capacity to absorb improves. It minimizes, also, the macroeconomic risks from those inflows.
Second, the recent commodity boom and rapid growth in Asia have improved Sub-Saharan Africa's export prospects. The time may be ripe for the region as a whole to reverse the long-term decline in its share of trade. Commercial exchanges with Asia, particularly with China, have expanded dramatically, although Europe and the United States remain the trading partners.
Finally, improved macroeconomic performance and debt relief have altered the medium-term debt outlook for many countries. Domestic debt markets have become more active and foreign portfolio investors are taking an active interest in several African countries. Nevertheless, the government must still make sure that any new borrowing on concessional terms is consistent with keeping debt within sustainable limits, and use it in very productive projects and endeavors.
Thank you very much, and I am ready, with my colleagues, to take your questions.
Question: Mr. Bio-Tchane, could you address, on Mozambique, why is rural poverty declining? It is not because there has been a faster influx of people into the cities and there are fewer people in rural areas, I assume, but what I really wanted to ask you and your colleagues is, of the HIPC countries, can you give us a report card? Who is doing particularly well and who are lagging behind?
Mr. Bio-Tchane: Let me take the general question and then may be Benedicte or Siddharth could take the specific question on Mozambique.
Clearly, when you look at the data, but also when you visit the countries, you can clearly see major progress in HIPC countries. I just went through the case of Mozambique, but you can clearly see the same happening in a country like Tanzania, certainly in Uganda, and also certainly in a country like Mali. We heard a very good spokesperson this morning in the Civil Society meeting on the achievement of Mali. You can certainly cite Burkina Faso as well. So, there are many countries where progress had been good. The recent data that I just commented on, broad-based growth clearly demonstrates that there is a good story to talk about, particularly given the resources the countries got through the HIPC and the MDRI initiatives.
On the other side, there are countries that are not doing well, starting with post-conflict countries or countries going through a conflict that are HIPC-eligible countries. Because of that, because of the conflict, they have not received the full HIPC and MDRI resources. Clearly, the challenges are on the political side, on the security side, and these are countries like the DRC, the Congo Democratic, Cote d'Ivoire and, more recently, Sierra Leone. We just concluded a PRGF program with Sierra after a few years of a very difficult situation. I hope that we could build on that new program and achieve growth and success in Sierra.
Ms. Christensen: I do not think I want to necessarily comment specifically on Mozambique, but just to say what are the factors that are important in order to reduce rural poverty in addition to poverty in the cities. I think it is many factors. First, in terms of fiscal policy-that is one of the areas that we focused on-fiscal decentralization, effectiveness of fiscal institutions is one of the issues that is important. A very large part of poverty-reducing expenditures are disbursed through decentralized institutions, and the effectiveness of these institutions is one of the issues that is at stake, whether actually funds reach the targeted ones.
Now, another thing is infrastructure in a broad sense, roads, transportation of various sorts, but also finance; I mean, are basic microfinance, other financial services available out in the rural areas, and then I guess, also, how agriculture is doing. We know that a very large part of the population is engaged in agriculture, and growth in the agricultural sector is also very important for the rural poor. So, these are just more general than Mozambique-specific questions
Mr. Bio-Tchane: With Mozambique, I think it is also fair to say that, having witnessed in that country more than 10 years of sustainable growth at an average of above 8 percent-we just mentioned that figure in the report-you need that to achieve poverty reduction. Also, you need appropriate fiscal and revenue policies, and we have that in Mozambique as well. So I think the first condition of a high growth rate in a sustained period is a necessary condition, but you need other conditions, revenue distribution, appropriate fiscal policy, including decentralization, and that is happening in Mozambique as well.
Question: (THROUGH INTERPRETER) My question is for Mr. Bio-Tchane.
Can you tell us something about how the economic situation of the CFA zone is developing, facing an ever stronger euro, and the strongest currencies such as the dollar and the yen are already declining against the euro? How does this affect the CFA zone vis-à-vis the eurozone?
And Cote d'Ivoire, do you think Cote d'Ivoire is going to become, again, one of the major countries in the West African Union? I would also like you to tell us something about the development of the economic situation of Mali, which is having presidential elections soon, end of April, and here Malians in Washington will be able to vote for our future President.
You also mentioned something earlier and I would like you to go into a bit more depth of how do you see the Malian economy in five years' time and the aggressive approach on China toward African nations. Could you comment on that?
Mr. Bio-Tchane - On China, I will leave the question to Benedicte, who is very well informed on that. On CFA, I mean WAMU and, more generally, CFA countries, I think if you read our latest report, what is clearly documented is that CFA countries are growing, but they are growing less than the other countries in Africa. I will not link any case to the exchange rate regime. I will probably link it to the policies in the countries, because you can see that when you look at the data country by country, you can see that some of the countries are performing better than others. Mali is a very good case, and I will elaborate a little bit more on that. Burkina Faso is another country. So, I think what the report is saying is that the policies determine what is happening in the economy. When you have good policies, then you have a good outcome, good results, and when you have weak policies, of course you have different outcomes. That is what we are having in the CFA zone.
So, that is as far as the data is concerned. As far as the policies are concerned, we need more structural reforms in that area of the continent, that we need more reform in the labor markets, we need more reforms on trade because of the exchange rate regime. So, because you have that exchange rate regime, you need more structural reforms in general than in other countries.
Now, on Cote d'Ivoire, we are working closely with the authorities, and I welcome the new political developments in that country. The authorities are currently visiting the Fund, and we expect to continue our discussions with them with the aim to completing the discussion started a few months ago on a program that could be supported by a post-conflict arrangement.
Finally, on Mali, I would have loved to give the floor to the Civil Society representative who spoke this morning about the success of Mali. As I said earlier, this a country that is growing very well, that has achieved substantive growth during the last three years, that is going through some interesting reforms. We look forward to continuing our relations with the current authorities, and I hope that the election will go well in the country and probably after the election we will continue our work with the country.
Ms. Christensen: China has increased a lot its involvement in Africa, as you know, and I just wanted to comment, also, a little bit on the diversity of involvement, because trade has expanded very drastically, financial assistance has expanded, but there is also foreign direct investment going into Africa. In general, we welcome all these developments, because we think they offer opportunities for the African continent to increase its trade, its financing, etc., and to increase growth.
What is important is, when financial assistance is given, when China gives aid or financial assistance otherwise, that it is consistent with the debt sustainability framework of each of the countries. I would say we encourage all the loans that are being given by China to be considered like any other loans of the more traditional countries or lenders, and to be seen whether they are consistent with the debt sustainability framework, and we encourage transparency around these transactions. Altogether, I would say that in a period when traditional donors have not quite lived up to their commitments at the Gleneagles Summit, we welcome the increased assistance from China.
Question: I would like to ask Mr. Bio-Tchane, what you intend to do for those countries which are post-conflict countries or which are into conflict now on your side financially and your power on politics to change and help those countries.
Ms. Bhatt - Yes, we will get to that. Can we take another question as well?
Question - With the IDA 15 replenishment taking place and the task of raising money for it, are you all concerned that the controversy around the World Bank President will pose a problem in raising money for the Fund?
Mr. Bio-Tchane: We are clearly countries to live by their commitment made in Gleneagles. This includes the call recently made for IDA, but also for the African Development Bank, and also, beyond that, to the bilateral donors.
On the post-conflict issue, let me say that we have an instrument that we are using currently. We call it the EPCA, and that is the instrument we are using with countries like Cote d'Ivoire. We are very much engaged, as I said. We have used it in the past for countries like Rwanda, Sierra Leone. Beyond that, we have started in the staff studying how we can improve that instrument to be more responsive to countries, intervene faster than we are used to, but also in a more flexible manner.
Mr. Tiwari: Let me take one off-shoot of your question on Fund-Bank collaboration. There have been various task force reports out on it; we welcome them. At the working level, the collaboration is as strong as it has been. We have joined hands on several areas, PFM or public financial management being one of them, the financial sector being one of them. There was a seminar in Johannesburg last year in December, which was put up with the bilaterals, with the help of the Bank. So, at a working level, collaboration and coordination is as best as it has been in years.
Question: You were speaking about the falling price of commodities. Do you not think that some African countries might be involved in alternative fuel like ethanol?
Mr. Bio-Tchane: Well, you are right, some of the countries are already investing in ethanol, and obviously it has something to do with the current oil prices, including actually some oil-exporting countries; Nigeria is building some capacity in ethanol production and exports. South Africa is very much engaged, with an appropriate policy being put in place. So, I think it is clearly an issue that several African countries are taking on.
IMF EXTERNAL RELATIONS DEPARTMENT
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