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IMFSurvey Magazine: Countries & Regions

Policy Advice, Technical Assistance at Heart of IMF Support for Africa

Tanzania's Finance Minister Mustafa Mkulo (l) greets IMF Managing Director Dominique Strauss-Kahn in Dar es Salaam (photo: Stephen Jaffe/IMF)

STRAUSS-KAHN IN AFRICA

Policy Advice, Technical Assistance at Heart of IMF Support for Africa

IMF Survey online

February 29, 2008

  • African countries more exposed to challenges faced by emerging economies
  • Focus on helping low-income countries maintain macroeconomic stability
  • IMF considering another technical assistance center for southern Africa

The IMF stands ready with policy advice and technical assistance to help its African members build on their progress of recent years to achieve a sustained reduction in poverty, Managing Director Dominique Strauss-Kahn said at the conclusion of a week-long visit to Africa.

"One of the aims of the reforms that I am proposing at the Fund is to focus more on helping low-income countries secure and maintain macroeconomic stability, as they go through different stages of development and are subject to different shocks, ranging from abrupt changes in commodity prices and aid flows to abrupt changes in capital flows," Strauss-Kahn told participants in Dar es Salaam at the February 29 opening of new headquarters in Tanzania for the IMF's technical assistance efforts in East Africa.

"This is important because without macroeconomic stability efforts to increase growth and reduce poverty are not likely to get very far, and without macroeconomic stability it is very difficult for development institutions and agencies to be effective."

Good economic outcomes

The continent has seen the highest sustained growth and the lowest inflation in more than 30 years. This reflects some things specific to Africa: less conflict, better governance, better macroeconomic policies, and debt relief. And it also reflects a period of good economic outcomes all around the world which have been reflected in good human outcomes.

But despite the great strides achieved since the Millennium Development Goals were agreed in 2000, there is a great deal still to be done. In sub-Saharan Africa, 24 million children are still not in school, 360 million people still lack basic sanitation; and two-thirds of the world's 33 million people living with HIV are in Africa.

At the root of these daunting statistics is poverty: almost 1 billion people, including more than 260 million in sub-Saharan Africa, still live on less than $1 a day. "All of these problems, and especially poverty, are acute in Africa," Strauss-Kahn said.

"And everywhere, the consequences of poverty have a human face," he added. He described how at the Buguruni school for the deaf in Dar es Salaam he had met children whose deafness stemmed from failure to treat childhood illnesses, which would therefore be preventable in higher-income families.

Strauss-Kahn and his wife Anne Sinclair with children of Buguruni School for the Deaf in Dar es Salaam, Tanzania (photo: Stephen Jaffe/IMF)

Private capital flows

Strauss-Kahn's visit to Burkina Faso, Nigeria, and Tanzania focused on some of the changes that are happening on the continent. Africa is becoming more integrated into the global economy. Many countries are benefiting from increased demand and higher prices for the commodities they produce. Private capital flows to Africa were over $50 billion last year. And new donors and foundations are ready to support Africa, even as aid from traditional sources has not been scaled up as promised.

With progress come new challenges, and African countries are becoming more exposed to some of the challenges that emerging economies have traditionally faced. For example, Africa is attracting much more portfolio investment than in the past, but what flows in can also flow out rather rapidly. And Africa is developing trading links with other countries, and reaping great benefits from trade integration. But if the expansion of global trade falters, then Africa will again be exposed.

Describing the continent as being at the heart of the Fund, Strauss-Kahn called for a close relationship between African countries. This is why in designing reforms of the Fund, enhancing the voice of low-income countries is important, Strauss Kahn said. "Through the Fund, African countries should have a voice on the policies of advanced economies that affect their people."

Success stories

The Fund is also increasingly looking to the future. For many countries in Africa, it will need to focus more on issues such as the policy response to capital inflows and how to develop local financial markets. In doing this Fund economists can learn lessons from the problems and challenges that emerging markets have encountered. To this end, Tanzania has offered to host a conference in late 2008 on the IMF and Africa, to be attended by finance ministers and central bank governors, and others, to show-case success stories in sub-Saharan Africa and to share cross-country experiences.

In addition, the IMF supports African countries financially, including through debt relief. Some countries, like Nigeria or Tanzania, that have achieved stability and no longer need direct financial support form the Fund, have taken advantage of the Policy Support Instrument. This is a way for the Fund and governments to remain intensively engaged with each other, and also to provide a framework for technical assistance (TA) and financial support from the international community.

The Fund also provides technical assistance to Tanzania (for revenue administration, public financial management, banking supervision, and macroeconomic statistics) and to other countries in East Africa. Much of that support is provided though the East AFRITAC.

Capacity building

Regional TA Centers in general have an essential role in the IMF's engagement with low-income countries. They show that the IMF remains committed to capacity building through an effective partnership arrangement.

The IMF's Regional Technical Assistance Centers in Africa have been a success. The decentralization of TA has not only lowered costs, but has also created more ownership among the beneficiary countries through the participatory governance structure and the ability to respond quickly to the needs of members.

"Indeed, the AFRITACs, including this one, have been so successful and are in such demand from countries not currently served by one, that we are considering opening another center covering southern Africa," Strauss Kahn said. "The challenge is not merely to maintain this level of technical assistance but to scale it up in response to the evident need for capacity building in Africa.


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