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Africa, A Systemic Challenge
A Commentary
By Michel Camdessus
Managing Director of the International Monetary Fund

Le Monde
January 17, 2000

Reproduced with permission of Le Monde

french

For too long, and despite numerous efforts and initiatives of every kind, Africa's progress toward economic and human development has remained shaky. Yet, the continent has enormous potential, which the international community cannot resign itself to leaving untapped. Here, then, is the quintessential test of our ability to respond to the greatest challenge of the third millennium: to overcome poverty wherever it is most dire. The humanitarian challenge is staggering, and the strategic challenge no less so, for, as Mexican Finance Minister Angel Gurria stated so well, in a century of plenty, poverty represents the ultimate systemic risk.

How, then, should we respond to this challenge? A conference of sub-Saharan African countries, sponsored by President Bongo and to be attended by many of his fellow heads of state, will address this question in Libreville, Gabon, January 17-19, 2000. Having been asked to take part in the proceedings, I would like to explain some of my reasons for feeling hopeful. A new beginning is possible for Africa, but only if all Africans take part and the entire world comes to their aid.

To begin with, the economic environment is improving. Real GDP growth in Africa has averaged 4 percent annually for the past five years, despite an array of adverse circumstances. It is now positive in per capita terms, after nearly 20 years of steady decline. Some countries are now recording rates in the 5-8 percent range. Annual inflation has been reduced to single digits, compared to 40 percent in the first half of the 1990s. This clearly demonstrates the success of structural adjustment policies when they are implemented with perseverance, as well as the benefits of essential, long-postponed measures such as the devaluation of the CFA franc in 1994. Moreover, these achievements should be enhanced by an increasingly favorable economic environment in Asia, Latin America, and Europe, providing ever more dynamic markets for African products.

In addition to these encouraging economic developments, Africa should benefit from the heightening of public awareness on several major issues around the world. In Africa, first of all, no one today is extolling the virtues of the so-called alternative development policies that were supposed to eliminate the need for restructuring efforts. All are now willing to admit that development is dependent on improved macroeconomic stability; consolidation of the financial sectors; reform of legislative, regulatory, and judicial frameworks; pursuit of regional integration initiatives; strengthening of democracy; and good governance. In Africa, as elsewhere, it is now known that transparency and anti-corruption efforts are no longer optional.

The modern world is also much more knowledgeable about the relationship between the quality of macroeconomic equilibria, growth, and poverty reduction. We are much more aware that this relationship is circular. Combating poverty through well-chosen investment in health, education, and rural infrastructure has a multiplying effect on the dynamics of growth. Moreover, the opportunities for human development inherent in such efforts justify the adoption of necessarily strict macroeconomic and structural strategies and can win them essential popular support. Poverty reduction efforts and strategies aimed at macroeconomic excellence are therefore mutually supportive. The circular nature of this relationship is one of the key factors that could enable Africa to boost its growth rates gradually from the present level of 4-5 percent to 6-8 percent, which will be necessary if the number of people living in abject poverty is to be halved by 2015, as the world pledged to do at the 1995 Copenhagen Conference.

The other key factor is peace. The armed conflicts directly or indirectly affecting a full third of the sub-Saharan countries are today the greatest obstacle to development. No one any longer denies the need for a concerted effort on the part of the international community to curb the sale of military equipment to sensitive areas, including even sales of light weapons—these are the weapons thrust into the hands of the thousands of children at the front lines today. Rare, too, are those who dispute the validity of the U.N. Secretary-General's recommendation that the African countries cut military expenditure to 1.5 percent of GDP and impose zero growth on military budgets for the next decade.

These changes of attitude could—and, in my opinion, should—lead to another: rediscovery of the meaning of development aid and its prospects for success. This change should enable us to shake off the so-called aid fatigue that has served as an excuse for the steep decline in aid worldwide in recent years. This is essential, if only to enable donor countries to raise their development aid to the level of their commitments.

We are now getting to the heart of the matter. During the past decade, the North and the South decided to join forces to combat poverty through convergent actions: the South by improving its policies and focusing them on human development, and the North by providing financing, seeking ways to reduce debt, and opening up its markets.

Virtually all peoples of the world have pledged to reduce extreme poverty and malnutrition by one-half, provide universal primary education, reduce stillbirths and infant mortality by two-thirds and maternal mortality by three-fourths, guarantee universal access to reproductive health services, reverse the current trend toward destruction of the environment—all by 2015—and close the gap between boys and girls in respect of access to primary and secondary education by 2005.

It is time for the North and the South to take advantage of the improved economic conditions and, most importantly, the current heightened awareness of the outlook for development in Africa and the stakes involved, in order to keep their word, in a transparent and renewed partnership. The Bretton Woods institutions—the International Monetary Fund and the World Bank—are aware of their responsibilities in this area. Linked, by our programs, to the dawning African renewal in the past decade, we must do better and learn from our cumulative successes and failures in an ongoing dialogue with the African countries, bilateral donors, and civil society. The Libreville Conference will be our first opportunity to present to the African countries the three new instruments we recently acquired to improve our response to the needs of the 75 poorest countries and, more specifically, the 36 most heavily indebted.

The IMF has created a new type of virtually interest-free loan, making poverty reduction the centerpiece of its programs. This Poverty Reduction and Growth Facility replaces the former Enhanced Structural Adjustment Facility;

The World Bank and the Fund have together developed a new approach to the assessment of our programs, more clearly assigning responsibility for the definition of such programs to the countries themselves. The government of each country involved will adopt a poverty reduction strategy paper (PRSP), with the broad participation of civil society in both drafting the PRSP and monitoring its implementation. This paper will form the basis for the lending of the IMF, World Bank, and eventually other creditors and donors, and will therefore ensure better coordination of external assistance and more effective use of debt relief. The resources freed up will be combined with those already set aside for human investment expenditure.

Lastly, by making use of a substantial portion of the increased value of our gold holdings and with contributions from 91 of our member countries, we recently organized the financing of our contribution to relieve about half the debt of the 36 heavily indebted poor countries. The World Bank and the regional development banks have also made significant strides in this direction, and we are all familiar with the efforts that Paris Club members are willing to make.

We must therefore put these new instruments to work as soon as possible. They will provide the necessary financial framework for this new beginning. The international community now has the multilateral financial framework it needs to allocate larger amounts of financing to honoring its commitments. It will be assured that its efforts will benefit priority areas, in a transparent environment and with the participation of civil society in the recipient countries.

Will this be enough? Yes, at least for making this new start, and if the African countries, once peace is restored, can devote themselves more exclusively to building their own future. One final condition must be satisfied, however—the opening up of the industrial countries to all exports from the poorest countries. Without this, today's substantial efforts to ease the debt burden cannot really accelerate growth to the extent necessary or reduce poverty at the promised rate. It is therefore essential that the negotiations so sadly derailed in Seattle be resumed without delay.

Le Monde dated Sunday, January 16, 2000