Transcript of a Press Conference by African Finance Ministers
October 20, 2007Washington, October 20, 2007
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Mr. Shamsuddeen Usman, Minister of Finance for Nigeria
Mrs. Zakia H. Meghji, Minister of Finance for Tanzania
Mrs. Cristina Duarte, Minister of Finance and Public Administration for Cape Verde
Mr Abou-Bakar Traore, Minister of Economy and Finance for Mali
Lucie Mboto Fouda, IMF's External Relations Department
MS. MBOTO FOUDA: Good morning, everyone.
I am Lucie Mboto Fouda of the External Relations Department of the IMF.
Welcome to this press conference of African Ministers who are also our Governors at the Fund, as you know.
We have today to talk with you four Ministers. I would like to introduce them to you.
From my right, we have Mrs. Zakia Meghji, Minister of Finance for Tanzania; then, we have Mr. Shamsuddeen Usman, who is Minister of Finance for Nigeria; to his right is Mr. Abou-Bakar Traore, Minister of Finance for Mali; and to the far right is Ms. Cristina Duarte, Minister of Finance and Public Administration for Cape Verde.
Translation facilities are available. Portuguese is on Channel 2; French on Channel 3; and indeed English is on Channel 4.
Each Minister will have about five minutes of opening remarks, and then we will take questions in the room.
Maybe would I ask Mrs. Zakia Meghji, Minister of Finance from Tanzania, to start the round of opening remarks.
Mrs. Minister, you have the floor.
MINISTER MEGHJI: Thank you very much, and thank you very much for inviting me to take part in this press briefing.
Let me start this by taking about Tanzania, and later on, our relationship with the Fund.
I would like to say that Tanzania is a country in East Africa that actually has enjoyed and is enjoying macroeconomic stability, and I can say that presently, the real GDP growth has averaged 5.5 percent over the last five years. And if I can talk for the year 2006 and say that was 6.2 percent, and we expect by 2007, 7 percent GDP growth.
Inflation has been contained. I have been in the government system for about 15 years, and I remember at that time that inflation was up to 35 percent, but presently, we have been able to contain it at around 5 percent through different macroeconomic reforms, financial reforms. But this year, because of the drought that we had last year, it has gone up to 7.1 percent, so as I talk, it is about 7.1 percent inflation.
International reserves also have improved tremendously through these different reforms that we have undertaken, and now we can talk about eight months' imports cover, although of course, there is a bit of a decline, but at least it is about six months' cover, and this is because of increased food and oil imports during June 2007.
Domestic revenue also again has expanded very much, and we have always reached our target. This year, our target was 300 billion Tanzanian shillings per month, and we have reached that. I am very happy to say that last month, it was 320 billion shillings. So we are doing very well on that so far as revenue collection is concerned, because of the changes that we have put in place and the widening of the tax base but also the reforms in the Tanzanian revenue authority.
The external sector has actually benefited from rapid growth through nontraditional exports, particularly gold and other minerals and horticultural products. However, I will say that the sector remains vulnerable to exogenous factors like weather as well as international market development. We would like to actually diversify our export base, and I will say that we always welcome investors and these areas.
I would like to say that last year, as I pointed out, was rather challenging, because of the combined effect of severe drought in Tanzania and also the high oil prices on the international market. Of course, we suffered in terms of energy. The concentration of energy in Tanzania has been on hydro, and therefore, this brought some problems to a certain extent. But because presently in Tanzania we also get to have gas, we have put in place a financial recovery program which we are following, and I would like to say that presently, the situation is on track.
Therefore, I would like to say that the import bill rose as the Government had to import food and expensive oil for power generation. But presently, of course, we have in place, as I said, the recovery program of Tanzania, TANESCO.
The other aspect I would like to point out is that as the economy has recovered, from these shocks, good performance is recorded in the trade and tourism sectors--manufacturing, mining, construction and also the communications sector. Tanzania is endowed, of course, with tourism attraction. I was the Tourism Minister for about nine years, and I would be talking about Tanzania as the land of Kilimanjaro and also Zanzibar.
So, one can say that real GDP growth is projected to be 7.1 percent in 2007 and 7.5 percent in 2008. Our macroeconomic policies are geared toward increase the pace of growth as a basis for sustainable poverty reduction, and the Government is therefore committed to the following.
One is maintaining the hard-won macroeconomic stability. As I pointed out earlier, of course, the situation was not very good many years ago, but presently, it is. So we have maintained and we are maintaining the macroeconomic stability.
The other aspect is to promote the private sector investment, which is an undisputed engine of growth as the public sector has withdrawn from the productive sectors. So the private sector is playing more and more of a role, and we feel that in other sectors--for example, energy--the private sector could play that role, even in infrastructure in that sense.
So it is important to scale up investment in productive infrastructure, which has often been cited as the most binding constraint to private sector development.
Now, the measures that are taken for public-private partnership in the infrastructure sector include the establishment of independent utility regulators. We have put in place regulatory authorities insofar as roads, electricity, and water are concerned, and next month, we are going to put in place an electricity bill, which will mean that the private sector can produce but also at the same time will be able to distribute energy, whereas presently, it is not possible to do so. So we hope to see more and more private investors in that field, but especially, also we have found gas in the southern part of Tanzania and also other gas fields not far from Dar as Salam.
Now, on the role of the IMF, if I can just talk quickly, we can say that Tanzania's relationship with the IMF has gone through swings since we joined the Fund in the 1960s, actually, right after independence. In short, one can say that Tanzania has moved from viewing the Fund as an enemy - previously, when you would talk about the IMF, people on the street would be very negative ---through a period which could be characterized as a "reluctant reformer" to the current status now, of a mature stabilizer in implementing an IMF-supported program under the Policy Support Instrument.
The current phase of good relations with the Fund follow Tanzania's decision in the mid-eighties to embark on extensive economic reforms. These reforms focus on market liberalization to improve factor productivity.
One can say that through the various Fund programs, Tanzania has received support in the following areas--balance of payment support credit; policy support, including technical assistance and so on.
I think my time is up, but I would like to say that Tanzania is actually putting in place a number of reforms, financial sector reforms, legal sector reforms, and so on, and perhaps during the question time, I may be able to answer more questions.
MINISTER USMAN: Thank you very much, distinguished ladies and gentlemen.
Just to say that I am sure you are all aware that Nigeria has had a very successful transition for the first time, from a civilian to a civilian government. This is the first time that this has taken place. And yes, there were some issues about the electoral process and so on, but that is again part of the reforms that have been initiated by the present Government--even reform of the electoral process--and we are talking about reforms and reforms and reforms.
You must also be aware that last Monday, the Board of the IMF looked at the fourth and last review of Nigeria's PSI, and Nigeria came out with flying colors. Again, the IMF has made this review public; it is on their website, and you can look at the review. But we have had meetings in fact with the top management of the IMF, and everybody is extremely happy with the performance of Nigeria, especially given that there has been a transition from one Government to another.
And as a representative of the new Government, I would like to assure you that there is a very strong commitment to continue with these reforms, to consolidate the gains that have been made in terms of macroeconomic stability, exchange rate stability. For the first time, Nigeria is becoming a place where, like all the Fund managers said, if you don't have a Nigerian strategy today, you don't have a strategy. And that is really what is happening.
Now, in the background, there is a lot of work going on to emphasize more work on constitutionality, especially by the new Government, respect for the rule of law, and due process. There have been some concerns recently due to certain misrepresentations about the commitment of the new administration to integrity and the pursuit of anti-corruption. I would like to assure you here that I think there has been a considerable amount of misinformation there. The present President is the first President in the history of Nigeria not only to declare his assets as required by law, but to make such an asset declaration public. And he is not doing it for the first time. For the last eight years as State Governor, in each and every one of those eight years, he not only declared his assets but made the declaration public. And he has set a good example, because a number of us Ministers have followed suit. The Vice President has also declared his assets.
So, really, I think there is no doubt at all about the commitment to reforms and the anti-corruption stance of the new administration.
The Nigerian economy is doing very well. We recorded an average growth rate of about 6 percent last year. And there are new challenges. Yes, oil prices are doing well, and they seem to be on the up-and-up. But as a result of that, our external reserves have risen considerably, I think in the region of about $47 billion currently. But this in itself poses a number of new threats, especially in terms of macroeconomic management, both in terms of fiscal policy and monetary policy.
What we are doing is identifying and dealing with these new threats. We are trying now to raise the economic growth to a level that is much higher and to make it more sustainable in the long term. And to do this, just like the Minister from Tanzania said, I think the big challenge for us is how to provide certain basic infrastructure which is lacking in Nigeria, especially power and transportation, and the whole reform of the energy sector in order to get it to yield better returns for the country.
So we are also looking at various options, the PPP options, and very soon, we are going to be announcing the new framework for how this is going to be done. We have already been approached by many international investors trying to come in and play some role in that area.
Let me now come back to the wider issues of the IMF and the World Bank, and especially as a representative of the African Group at the IMFC, to say that the position of Nigeria, which is the same as the position of the African Consultative Group, which is the same as the position of the G-24, is that the developing countries need a greater voice and representation in the two institutions, and the greater voice will come through the quota arrangements. We are calling for at least a tripling of the Basic Votes for our countries, and the other quota and voice reforms, especially using GDP but measured according to the PPP.
On the issue of representation, we acknowledge the recent appointment of Ms. Ngozi Okonjo-Iweala as a Managing Director of the World Bank, and we are urging the IMF to also, as part of these reforms, identify suitable Africans and get them into the higher echelons of the institution. And I am calling on the IMF also to start and continue with the reforms in line with what is happening with the World Bank. I will take any questions that you may have later.
MINISTER TRAORE: Thank you very much, Madame. I would like to begin by thanking all of you for being here and also to tell you how honored I am to be here before you this morning, to inform you of the situation of public management and public finance in Mali, and I hope that by the end of this press conference, you will be better informed of the situation in our country.
First of all, I would like to tell you that Mali is characterized by the good quality of political governance. It has democratic institutions that are appointed through elections, and democracy therefore plays fairly. Our institutions are therefore very sound.
We are furthermore one of the first countries in our area to have set up a Bureau of Public Auditor which is totally independent of the executive and legislative power, and this Auditor Office publishes its own report on the quality of the financial and economic management. And as to public finance, for a certain number of years, we have been reaching a 5.2 percent growth rate. But this is not enough if we want to meet the MDGs.
I would also like to talk about other aspects on the quality of our public finance--the way we controlled prices, amongst others, despite the bad year we had in 2004. The inflation rate is way below the standards required. It is 1.5 percent.
As for the investments, they are on the upside, and the investments with relation to the GDP are increasingly regularly. We have also been one of the eligible countries for the HIPC Initiative, and the recent initiative of the multilateral debt cancellation.
But despite all of this, our performance was possible because we were able to set up a strategy for growth and poverty reduction. The first period went from 2003 to 2006, and the next stage, which will take us up to 2011, has already started.
I think that what is greatly expected of us is to reach at least a 7 percent growth rate for us to be able to meet the MDGs, and to do so, we hope that our growth strategy and the poverty reduction strategy that have been set up are becoming operational to be one of the intermediary stages to reach the MDGs, and it is stressing a number of different areas, including that of the diversification of production. We would like to broaden the growth rate, and we are also stressing quite strongly the private sector and improving the business climate. The business environment is extremely important, and it is something that we are going to pay much attention to in our strategy.
Furthermore, there are a number of sectors that are a risk for the quality of investments, and these are areas which we really have to take action on to reinforce growth--for instance, cotton, since we are a strong cotton-producing country. This sector has a strong impact on the economy. We are also reforming the power sector, the energy sector, which is the case for all of our countries, but in our country, a relationship we had with one of our partners deteriorated to such a point that we had to manage the issue of energy, and there was a major deficit in our investment programs, and therefore, our production equipment was extremely obsolete.
Furthermore, we will also have to work on the financial sector, the banking and non-banking sectors. We are carrying out reforms of a number of institutions, and the non-banking sector, that is, the pension funds of public officials, is being totally reviewed.
With all of these strategies, we believe that we will make headway, and we are ending a third program with the Bretton Woods Institutions, a program for poverty reduction and growth, and now we are also dealing with programs that are not funded. Furthermore, we have program support from the World Bank with a number of development strategies that we are implementing. So our relationships with these institutions are well on track.
MINISTER DUARTE: Thank you very much.
First, I would like to say that in the invitation that has been addressed to my country and to myself, they requested me to present the 32-year Cape Verde experience in five minutes. I will try to fit 32 years into five minutes.
Please allow me to switch to Portuguese, which is the official language of my country, and I would like to speak in this press conference.
For you to better understand what Cape Verde is today, very, very briefly, I would like to tell you what Cape Verde was in 1975.
In 1975, Cape Verde was an insular country with 10 islands, 450 kilometers away from Senegal, and sometimes it did not even appear on the world maps.
In 1975, our history was marked by hunger, and the Cape Verdean population had a single objective--leave the country.
We became independent in 1975. By that time, the per capita income was $190. Our Treasury had nothing. We didn't have one penny. We had no financial funds whatsoever. We needed to ask for the help from Portugal with $300,000. We began our history with $300,000, ladies and gentlemen.
We invested in three different lines since 1975, and these four lines have been maintained over these years. We decided to build and consolidate a nation state. We decided to invest in the force and in the importance of our institutions. We decided to invest in leadership. And from the beginning, we worked according to a long-term view.
Over the last 35 years, these have been our main lines of action. During the first ten years, what did we do? We massified [sic] education. Children had no access to schools. Very rapidly, we reached literacy rates that were extremely high and also very high rates of schooling.
In the nineties, we began a deep reform program. We privatized the entire business public sector in the nineties.
From 2002 to date, what is happening in Cape Verde? We have been growing at average rates of 7 percent from 2002 to 2007. Our GDP per capita went from $190 to almost $2,000. We are still investing in education. Right now, we are creating quality higher education in the country. We invest strongly in reforms, several types of reform--the financial sector, the tax system, financial management, and so on and so forth.
At the same time, in terms of public finance management, from the very beginning, we saw it very clearly that after the privatization, the management of public funds had to be based in strict principles and characterized by prudence.
This is what we did. We tried to contain public expenditures. We implemented tax reform. Recently, our fiscal revenues have been growing on average from 13 to 14 percent. This has led to more fiscal room, and in our 2008 budget, for the very first time, we will see the possibility of channeling a significant part of our current accounts to fund our investment program.
In terms of our monetary policy, recently, we have had remarkable improvements. International reserves have grown in a sustained fashion, and right now, we are facing an exchange regime which is in relationship to the euro and the reserve level that we have guaranteed sustainability for this option in terms of our monetary policy.
But our objective in itself is not good public finance management; it is not economic growth. We believe that we have to manage well so that we create room for the private sector, and this is what has been happening recently in Cape Verde.
Considering that we have maintained the public deficit at perfectly controlled levels, the credit to our economy was able to be occupied and taken by the private sector. More and more, the private sector is performing an engine role in our economy. Foreign direct investment has grown in exponential terms. This foreign direct investment is basically channeled to our tourism sector, so more and more, the private sector is occupying the room it should occupy.
But our objective is our people. Allow me to tell you about what we have achieved in terms of the MDGs.
For your information, the literacy rate in Cape Verde right now is 79 percent. In the urban areas, we have reached 85 percent. Schooling rates in Cape Verde have reached 70 percent. In the cities, we have reached 78 percent. In access to health, we have reached a rate of 74 percent; in the cities the rate is 85 percent.
From the experience in Cape Verde, I would like to say that over these 32 years, we have experienced a very significant political realism. For your information, during the Cold War period, the bipolar world, Cape Verde refused to take sides. From the very beginning, we decided at the international level in terms of our diplomacy to create a network, to create partnerships that could meet our interests, our strategic interests.
What are the lessons that we can take from this process coming from a small island country without natural resources but which, right now in 2006, presents a growth rate of 10.8 percent?
I would like to tell you about the first lesson that we take. First, consistency in our policies; ever since 1975, we have been consistent in terms of our public policies. The other line has been the persistent implementation of reforms. Reforms involve change. We face resistance. sometimes we are sabotaged. But persistence and pragmatism have guided us.
The other lesson for us is that this entire process happened within a scenario of broad democracy. For your information, in 2001-2002, the Government mobilized the forces of the Cape Verdean society, and for two years, we were able to discuss and to define in a participatory fashion what our short-term view would be. We believe that right now, tourism is giving us a lot of oxygen, but we cannot continue to be marveled blindly with tourism. We need to think about Cape Verde in 20 years. We think that we have a vocation to be a specialized economy in the area of services, a knowledge economy, and an economy that will focus attention on information and communication technologies.
The lessons received after these 32 years correspond to these lines--managing the public thing with prudence, with ethics, and with a lot of engagement with our very small island country.
MS. MBOTO FOUDA: We will now take questions in the room, and can I please beg you to be succinct in asking your questions so that we can take as many as possible?
QUESTIONER: I would like to ask for elaboration. Mr. Usman, when you spoke about the risk or the threat from oil wealth, I took it to mean that you were referring to corruption, the danger of this increased wealth being stolen, or at least that is my conclusion. I wonder if you might speak to that, if that is really what you had in mind.
And for Ms. Meghji, could I ask you please to just elaborate a bit on what you mean about the Fund is now, in your words, an "ally" in the process of development?
MINISTER USMAN: No, I am not talking about what for the press is the more sexy issue of corruption; no. Actually, it is more to do with the real economic management threats. You know, when you have a country like Nigeria that depends so heavily on oil production, there is what is called the Dutch disease where, because of the huge amounts of funds that are coming in through oil, there is a continuous appreciation of the exchange rate, and that in itself provide serious problems of monetary management, especially in order to achieve monetary stability.
The second point on the fiscal side is how do you maintain fiscal sustainability with these huge inflows of funds--again, because if you try to spend all of them, you just heat up the economy, and a lot of it just goes up in inflation. What I am saying is that we have been trying, through what we call the "benchmark oil price"--by setting the price for budgetary purposes at much lower than the market price for petroleum, we then save the rest in a savings fund.
It is these issues that we are dealing with. I think the issue of corruption is becoming less and less an issue in Nigeria. You can check that by the rating of Nigeria by Transparency International. Some people said our last rating was that we were the 38th most corrupt country in the world, and there are issues about how that is measured, but even if you take that at its face value, that is still 37 steps higher than when we were rated the most corrupt country in the world.
So I think we are dealing very squarely with the issue of corruption, and there are more interesting issues for us now, like how best to manage the economy.
MINISTER MEGHJI: Thank you very much.
When I said that presently, the Fund is looked at as an "ally," I was comparing it, of course, with a number of years before. And as I said, our contract with the Fund goes way back into the sixties. I remember that time when Tanzania decided to be a member of the Fund, the demonstrations that took place amongst students at the universities--I was in the university at that time. So the way that the Fund was portrayed was as an institution from outside that wanted to tell the Tanzanian people what to do. And having come from an independence period in the sixties, people saw the Fund as another colonial thing.
But things have changed, as I said, and also the policies, which of course, to the Fund and to the leadership, it was important that we have these policies in order to reduce poverty and to have economic growth. So people didn't like some of them. For example, the question of the cash budget--so there was a situation whereby people would spend money without planning, and at the end of the day, there were problems, of course. But then, later on, people started understanding that actually, what the Fund was talking about was economic growth--poverty reduction and economic growth--put it that way. And, as I pointed out, a number of reforms therefore had to take place. Initially, they were saying that there would be no changes, but when the reforms brought a lot of changes in Tanzania, the people now say that the Fund is an ally.
As I pointed out, for example, inflation at that time was 35 percent. Presently, we talk about one-digit inflation. I said 7 percent, because there was no rain at that time and because of the importation of oil and so on, but it is still one digit, you see.
Then, there is the GDP growth, for example, the way it has grown. But also, the way that the Fund itself in our countries--for example, the way the representative of the Fund in Tanzania relates to the country, relates to the policy issues, and relates to the development partners, and therefore, the agenda of development is ours. It is the country's agenda. It is Tanzania's agenda--not the IMF--but the IMF is supporting to make sure the agenda is in place.
This is how I look at it, that presently, for example, you come to Tanzania, you talk about the IMF, and people will say yes, the IMF is an ally, putting it that way.
But also, as has been said by Minister Shamsuddeen, the changes that are taking place now, the discussion that is taking place now, the question of voice and so on, this also shows the changes that are taking place within the Fund itself.
QUESTIONER: I am sure that everyone has been very impressed by the country-specific assessments which we have been given, genuinely. But there has been nothing about the Region or Africa as a whole, and the absence of South Africa is quite striking. So the purpose of me grabbing the mike is to ask my usual Zimbabwe question.
Obviously, you cannot comment on political matters, but is this not a matter of extreme concern not just for Africa but for the entire world community, and if this is the case, what is Africa going to do about it?
MS. MBOTO FOUDA: Minister Usman, do you want to take the lead on that question, and then other Ministers may add something?
MINISTER USMAN: I thought you were going to ask somebody in southern Africa who is closer to the problem.
What I would say is that from the global perspective of Africa as a whole--and I think this has been illustrated by all the four countries; you know the larger number of countries in Africa, and you had to select just a few to come--but it is a very good representation of the very good rates of growth that have been achieved by most African countries. In fact, if you take the group as a whole, the growth rate has really been very wonderful. In fact, just in the IMFC this morning, what the IMF is saying is that the future prospects for Africa have even been revised upward.
So overall, I believe that the prospects for the continent are very good, and this is underwritten, really, by greater emphasis on correct macroeconomic policies, greater transparency, greater shift toward democracy--all the good things that everybody expects and that other international countries do.
This is not to say that within some individual countries, there are not some specific problems, and unfortunately, there are a few countries where you have laggards where performance has not been very, very specific. I would say that that in itself poses a very serious challenge for the African continent as to what we are going to do to make sure that we do not leave any country behind.
MINISTER MEGHJI: I agree with him, but I just wanted to say that Zimbabwe is part of Africa. It is a country in Africa. It is part of SADC. I feel that the problems of Africa will have to be dealt with by Africans, and therefore that it is not a question of pushing it out; it's a question of dealing among Africans. And this is what is being done. I think it's a process, and therefore, let us give the process some time.
QUESTIONER: I wish to ask Minister Traore a question, but the question refers to all Ministers. The G-24 Ministers wanted to be better represented in the Bretton Woods Institutions, and in the G-24 Communiqué, it is asked that Western countries be more scrutinized by the IMF because of their crises in the real estate market, et cetera. So there are a number of emerging African countries, but do you think that the crises that the Western countries are experiencing today will have a bad impact on African countries?
MINISTER TRAORE: I will try to give you an answer. You are putting a tough question to me.
There are two main points or two main questions within your question--what is the role of the Bretton Woods Institutions, namely, the IMF role, in oversight and guidance. And I would say this. We have been noticing over the past few years, let's say, since the Second World War, that both institutions have a more pronounced role in the developing countries. This is more true for the World Bank, less true for the IMF, but the IMF has an oversight role.
As far as developing countries are concerned, our relationships with both institutions are based on devising programs, as Mrs. Meghji said, initially based on structural adjustment programs, but we have evolved away from that, and now we are not just seeking adjustment in our economies, but how do we bring back equilibrium between economic fundamentals. This is why we have economic programs, so we have a development strategy and we focus initially on social sectors, access to drinkable water, education, health, and so on.
So you know what the position of the African Governors is. We wish to have greater representation within both institutions, but let's not try to seek innovation for the sake of innovation. We want our interests to be better taken into account. We wish to be efficient in our public policy implementation. We need to be credible in the fight against corruption, governance. We need to make progress. We have all said that.
African countries are moving forward, but we cannot change overnight, so we are hoping for greater representation within both institutions, but truly, what we are concerned with or what we seek to achieve is this. We want an evolution. We are members of both institutions, and we notice that the World Bank and the IMF have been more inclined to listen to some positions than others.
So what we say in Africa is that the dimension of our concerns, our concerns should be better taken into account. For example, we are faced with great constraints. We are not asking for blanket help, unconditional assistance, but we want our concerns to be better taken into account.
QUESTIONER: My first question is directed toward Madame Cristina Duarte. We do appreciate that you have given enough emphasis on consistency and, as you say, persistence in reforms. We in Pakistan stand to learn from you, but nevertheless, the question is how have you been able to continue to hold to the consistency and the persistence in reforms in the event of a change of government and the different political influences? How is it possible, or how has it been possible for you to continue to have the same uniform principles and policies. That is the first.
Second, have you been able to contain the rate of population growth and enough emphasis on agricultural development? What has been the quality of governance in your country, and how have you been able to institutionalize doing the good governance monitoring? Last: what are the costs of doing business.
MINISTER DUARTE: In terms of persistence and perseverance, I would like to say the following. Cape Verde, as I mentioned here today, has very few natural resources. We have an important explosive economic zone, but we have no natural resources. We have no oil; farmable land is only 10 percent; we have lived through years of drought, so we have practically no rain.
We have very little means of creating public policy to reach an objective, but in terms of the change of democratic governments in Cape Verde, public policy has remained the same. In order to be able to maintain our growth rate, we have to have enormous discipline in public finance, very prudent monetary policy, and as I mentioned before, this is also a result of 32 years of investment in education. We bet in Cape Verde on the human capital, and this has been since 1975. Since then, the education sector takes on about 24 percent of our budget. So we have invested heavily in education.
So persistence is almost an imposition on the public servants. In order to reach our objectives, we have to be coherent, consistent and objective.
In terms of agriculture and demographic growth, one of the reasons that made Cape Verdeans emigrate--Cape Verdeans historically are immigrants--was the difficult conditions in our agriculture sector. Just to let you know, Cape Verde only produces 10 percent of the food that the population needs, but historically, traditionally, we have learned to live with this, and we have to look at this objectively and look for alternatives. We have looked in the short term at tourism and at economic growth, but we have already identified the engines of growth for the long term.
As you know, we have also emphasized information and communication, but in terms of agriculture, the demographic growth, population growth, above the potential agricultural potential has been compensated by emigration. Here in the United States, there are about 400,000 Cape Verde. Cape Verde is a small country. We have about 480,000 to 500,000 population in our country, so it is the size of a neighborhood in New York.
Therefore, we are a very small country, and with the features that I have presented here, really, the agriculture sector has really never been an economic solution for Cape Verde. Therefore, we ended up with all this emigration.
Right now, we have a window of hope with new technology in the agriculture sector. We are going to emphasize the small and middle businesses in order to link them to the tourism sector.
Minister Meghji. On the question of governance, let me say that the broad policy of Tanzania is economic growth and poverty reduction. Within that broad policy, there are three clusters. One is the question of economic growth. The second one is the question of social well-being. But the third one, which is very important, is the question of good governance and accountability. So it is within the broad policy framework.
What have we done? One is that we have passed the anti-corruption bill; it is in place. We have passed the anti-money-laundering bill. We have put in place the Financial Intelligence Unit, which relates to the questions of money laundering, the banking sectors, and so on. But even the question of information on wealth which my colleague here has pointed out is the same in Tanzania, and presently, actually, you have to do it yearly, every year, and you have to say how you have been able to get whatever money you have been able--if you had two houses when you became a minister this year, and next year, you have three houses, you will have to say how you got these three houses, where the money came from, and so on and so forth.
In short, this is what I would say.
But on the question of doing business, in Tanzania, it has improved a lot, and actually, that is why we are getting more investors presently. We have put in place a one-stop center, the Tanzanian Investment Center, where you can do business, so that whether you want licenses or whatever, you don't have to move from one building to another; everything is the same building.
QUESTIONER: I have a question for the honorable Minister for Tanzania about the East African community.
Would you support giving extra executive powers to the East African community as an institution to boost its decision-making powers, and how do you react to suggestions that Uganda and Kenya are planning to fast-track the political federation, bypassing Tanzania? Do you think this would be a best means of establishing economic cooperation in the Region?
MINISTER MEGHJI: Let me say that we have had very good cooperation between Kenya, Uganda, and Tanzania. We are now part of the East African Customs Union. I think we are doing very well.
The question of fast-tracking has been discussed, and I think that we are in consensus with Kenya, Uganda and Tanzania.
QUESTIONER: I have two concerns that I would wish Dr. Usman would address.
One is the fact that there are concerns that Nigeria seems to be decelerating on reforms with the advent of the new administration, so I would like you to give assurance that that really is not the case.
Second, I would like you to also assure on harmony between the monetary policy and the fiscal policy, again against the background that a recent proposal from the CBN Governor did not get a presidential nod for implementation.
MINISTER USMAN: First of all, on concerns about decelerating on reforms, I thought I had already addressed that. There is clearly no deceleration.
You see, the nature of the reforms has to change. You are taking the reforms to a higher plane. The initial set of reforms was aimed at achieving macroeconomic stability--from inflation rates of about 28 percent down to single digits; exchange rate stability; fiscal sustainability etc. Growth rates of about 6 percent have been achieved.
So what you are doing is first of all sustaining all those gains while moving on to a higher plane. The higher plane of reforms now has to do with at least three key areas. One is sectoral reforms, and this is where the power sector reform is on--you may have heard about the appointment of the Energy Commission, privatization reforms. Then, there are institutional reforms. If you are a key follower of Nigerian events, you know that I have been working on reform of the customs system, for example, tax reforms, new tax policy, institutional and other reforms. But most especially also is institutionalizing and legalizing all the reforms that have been done by getting all the necessary legislation that will entrench those reforms and make sure they can be carried on into the future and that they are sustainable in the long term.
So that is really the next plan, and I'm sure from that, you know that there is absolutely no slowing down on the reforms.
I saw a headline yesterday. Unfortunately--I don't want to be particular--I think it was the "Emerging Markets" paper--the way they reported it was a little unfair to me, but journalists always like the more sensational element. If they went back to the recording of what I said to them, I'm sure they would say that there were quite a number of other issues. But that issue is still on the table.
Economic policy, especially future economic policy--this is a new kind of environment that we are creating where policy is discussed thoroughly internally before it is finalized. What the Central Bank Governor put on the table was a proposal, and that is being thoroughly discussed. The decision of the Federal Executive Council was that it should be discussed with the economic management team. So that is really what is happening, and there is a lot of public discussion of policy--unlike in the military days, when somebody would just wake up and announce a policy. Now, in a civilian administration, policies have to be thoroughly discussed and all the implications agreed before they are implemented.
QUESTIONER: My question is to Minister Traore. Could you describe the repercussions of a strong euro on an economy such as that of your countries, and is it taboo to talk about the devaluation of the CFR franc?
MINISTER TRAORE: As you know, Mali is part of a Monetary and Economic Union that comprises eight member countries, and they all have an agreement with the French Treasury, on the basis of which we have a fixed exchange rate between the currency of our eight countries--that is, the CFA--and the French currency, which was before the French franc, but now it is the euro.
So, to the question of parity between euro/dollar, you talked about a strong euro. I wouldn't qualify it as a strong euro. What I would say is that there is an increasingly large difference between the euro, which is strong, and the dollar, which is weak, but which is actually the case?
What we can say is that in our Economic and Monetary Union, a currency has to be measured according to a number of indicators, and in that respect, we are in a comfortable situation. Our exchange reserves cover about six months of imports, which is a comfortable position. But in most of these countries, there are sectors that are undergoing difficulties.
Now, is this due to problems of competitiveness or reforms within certain sectors? I think that is the question. For instance, talking about the cotton sector, we have quite a few difficulties in this sector, but for such a large production space, we just have one type of producer. So that is one of our difficulties.
The other thing is the rate of cotton on international markets. That is another problem.
So, to conclude on this issue, what I would say is that what is behind all of this--whether you are talking about a devaluation or not, what is behind it. It is a question of fixed pegging, and I can tell you, without this having to be that official, that we are reflecting on a system. Is it better to have a floating or a fixed exchange system? What would be preferable. And we think the situation is going to change in the future.
QUESTIONER: Concerning what the Minister said on infrastructure, it is a huge problem for Africa--roads and electricity. The African Development Bank is one part playing a role in infrastructure. What is the role of the African Development Bank in regard to the infrastructure of Africa?
The other quick question is concerning China relations. Recently, the new agreement between China and the Democratic Republic of Congo raised the question at the IMF and World Bank that DRC will probably not be able to repay its loan. So, what is the African continent thinking about the worry that the West has about China-Africa relations, financially?
MINISTER USMAN: First, on the ADB, certainly, the African Development Bank is going to play a key role--in fact, that is why it was established--in terms of addressing the infrastructure needs of the continent. You are right--it is not just Nigeria that is facing this problem--it is probably across the whole continent.
But we need some more innovative approaches. Part of the problem--in fact, all of our discussion with the World Bank and the IMF has been what new ways, innovative approaches, are we going to bring to the table in order to address the serious problem of infrastructure, because we don't want to continue to be depending on aid. We want to grow our own economies and achieve self-sustainability. And the only way you can do this is really--most of our economist, most of them, our people are very enterprising people. If you create the enabling environment, they will rise and work for themselves and grow their economies. I think the big challenge is what new methods of financing--and you have had PPPs in various countries. A lot of work is going on, and I believe that the ADB will be part of that picture. And I am also glad to say that from our discussions with both the World Bank and the IMF, they seem to recognize that that is a very important area for which some investment is necessary, even in terms of developing capacity within the African countries and within the Fund and the Bank themselves.
There was a second part to the question on the role of China. I think this is part of what we are trying to get the multilateral institutions, including the World Bank and the IMF, to recognize--that there are new kids on the block, new kids on the block that are ready to give concessions beyond the traditional concessions that are given. And I think there has to be a recognition of that. If China is ready and able to assist a number of countries, that must also be taken into context.
But on the other hand, I think the Chinese themselves also--the kind of terms that they grant those facilities also need to be carefully examined. I don't want to be specific, but we have one such project in Nigeria where, by the time you factor in all the terms--and I think that is the concern of the IMF and the World Bank, that really, you need to look at those terms that the Chinese and other aid assistance given--make sure that you understand those terms very well and analyze them properly to make sure that they are in fact as concessionary as they look.
So I think that is another cause for caution.
MINISTER MEGHJI: Just to add on the question of ADB, let me say that we had a meeting in Mali for the replenishment of the ADF-11, and I think the emphasis here is on the question of infrastructure within the country but also interregional infrastructure, because even when you talk about the question of aid for trade, if you don't have economic competitiveness, then, without infrastructure, you cannot actually do anything.
So the question of infrastructure is actually across Africa, and the African Development Bank is taking it up quite seriously, especially for ADF-11.
QUESTIONER: You can take this as a follow-up question. The "new kids on the block" you said are largely China and India, and they are competing in Africa. Frankly, why African countries need multilateral organizations like the IMF and the World Bank is for the foreign currency they provide, and now China is providing it in a more appealing and attractive way than these two organizations.
So I am wondering how would you see the relevance of the IMF and the World Bank in this new scenario? Do you think they are any longer relevant to you?
MINISTER USMAN: I think that clearly, they are relevant, because no matter what India and China can bring to the table, it is not going to be anywhere near enough to meet all of the demands and requirements of the African countries.
So, while India and China bring in some additionality, clearly, they cannot replace the multilateral institutions. I think that what India and China bring on board is additionality, plus sometimes faster disbursement and availability of these funds. But as I said, we must again also be cautious because sometimes you need to really scrutinize the terms that those new donors or new aid-givers or lending facilities are coming with. You need to scrutinize them very carefully to make sure that they are actually as generous as they look or as they sound.
Let me mention the case of Nigeria and the railway project that the Chinese have given a loan for.
First of all, the amount of loan given relative to the size of the project is a relatively small amount. And second, some of the terms that have been mentioned by the Chinese for that facility--by the time you actually translate them fully, you will find that overall, that facility is not as concessionary as it sounded in the first place.
So I am giving you that specific example, but again, I think I need to be cautious before I see headlines that we are actually renegotiating those terms with the Chinese--and as I said, they are still bringing some additionality as well as relative ease and availability of the funds. I think that should be acknowledged.
MINISTER TRAORE: As to the issue of the funding coming from new partner countries, the question arises quite often, but I think the main issue is the following.
Today we'll agree to the fact that African countries have to orient their policies to be able to reach the MDGs. Everybody today says that the traditional and classical multilateral aid isn't enough, but if there are new funding partners for these programs, what is the problem?
I would say it is this. First of all, the country has to have a development strategy that is consistent and well-organized, with an operating plan and a funding plan, so you can see the funding gap. The other aspect after the cancelling of the debt is to make us understand that the G-8 countries want to scrutinize these things. But the different countries have to make sure that the resources are acceptable.
In a case like Mali, the concessionality has to be at least 35 percent of the donation, and if the funding is concessional aid, and the resources are really going in the direction needed, I think it should not be a problem. In the case of Mali, we have important funding from India and from China, but it comes in addition to all the other spectrum of aid that we have from the G-8 countries and the multilateral aid institutions.
So I think there is no problem as long as it is a transparent problem, known to all.
MS. MBOTO FOUDA: I know there are still questions in the room. Maybe reporters can get in touch bilaterally with the Ministers.
I will take this opportunity to thank Minister Meghji, Minister Usman, Minister Traore and Minister Duarte for their time and for being here today.
Thank you all for coming. It has been a good moment, I think.