Transcript of African Department April 2024 Press Briefing
IMF News, April 19, 2024
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- Published: April 19, 2024
Overall regional outlook (Regional Economic Outlook for Sub‑Saharan Africa — “Tepid and Pricey Recovery”)
- Growth expectations:
- Growth expected to accelerate to 3.8 percent from 3.4 percent last year.
- Growth peaked at almost 10 percent in late 2022.
- Inflation and monetary policy:
- Inflation has been halved in the early months of this year, attributed to decisive central bank actions and slower food price increases.
- Continued focus recommended on reducing inflation wherever inflation remains well above target.
- Public debt and fiscal dynamics:
- Median public debt stabilizing at around 60 percent of GDP, halting a 10 year upward trend.
- Government interest payments now account for about 12 percent of revenues, more than double the level a decade ago.
- Official development assistance and concessional financing have become much more scarce.
- IMF financing and global conditions:
- IMF has provided $58 billion in financing to the region since the start of the Pandemic.
- Global financial conditions easing has allowed a few countries to return to international markets after a two‑year hiatus, but borrowing costs remain high for many.
- Resilience and Sustainability Trust: about $40 billion coming from the re‑channeling of SDRs (as cited for climate/resilience financing).
Key policy priorities and recommendations
- For national governments:
- Continue to improve public finances, with emphasis on domestic revenue mobilization to meet development spending needs amid scarce concessional financing and high borrowing costs.
- Sustain focus on reducing inflation where it remains well above target.
- Implement reforms to enhance skills development, spur innovation, improve the business environment, and promote trade integration to secure more affordable and stable financing.
- Prioritize spending and protect development outlays while pursuing fiscal consolidation (domestic revenue mobilization–based consolidation emphasized).
- On debt restructuring and creditor coordination:
- The G20 Common Framework has enabled progress (e.g., Zambia), though restructurings remain time‑consuming and painful.
- Negotiations with official bilateral and commercial creditors are ongoing in cases such as Ghana and Zambia; IMF staff‑level agreement remains the key component for program reviews and disbursements.
- Preferred creditor status cannot be unilaterally declared; recognition depends on other official creditors and specific institutional characteristics.
- On concessional IMF support and lending policy:
- IMF refines policies to support timely and efficient lending; recent reforms aim to preserve support capacity and are not targeted at any single creditor (China described as an important development partner).
- PRGT facility cited as offering 0 percent interest borrowing for low‑income countries.
Country‑specific points and questions addressed
- Malawi
- IMF maintained Malawi’s growth focus for 2024 at 3.3 percent.
- El Niño impacts (crop output reductions cited as “somewhere around 20 or 30 percent”) and flooding are significant shocks; IMF to send a team for assessment.
- Debt situation: official creditors provided financing assurances, but other creditors have not; unresolved creditor issues impede IMF financing effectiveness.
- Ghana
- As of the briefing, there is no MOU with bilateral creditors; intensive discussions ongoing and financing assurances remain in effect.
- Staff‑level agreement reached for IMF review; disbursement of $360 million referenced as pending and not expected to be prevented by lack of agreement with Eurobond holders.
- IMF provided input on commercial creditor terms shared by Ghana; government chose not to pursue a deal not consistent with program parameters.
- Zambia
- Progress under the Common Framework noted; official creditors signed off and government announced a deal with Eurobond creditors.
- Nigeria
- IMF emphasized role as countercyclical financier during 2020–2021; IMF exposure in the region cited as about 3 percent of GDP, 4 percent of GDP at most (median exposure).
- Nigeria: tax revenue to GDP noted as only 8‑9 percent, implying need to increase non‑oil revenue and diversify the economy.
- Subsidy reform: generalized fuel subsidies are highly regressive; IMF supports removal of broad subsidies coupled with social protection for vulnerable households.
- Cameroon and Cote d’Ivoire
- Some countries have returned to markets; IMF cautions full recourse to high‑cost market financing is not ideal and advises keeping the weighted average cost of financing low.
- Cameroon supported via IMF program; emphasis has been on concessional financing rather than market financing.
- Rwanda
- Question noted projected debt increase by $8 billion between 2023 and 2028; IMF response: debt sustainability assessments consider growth, tax revenue performance, and other variables — IMF assessment cited that debt remains sustainable for Rwanda and fiscal policies are moving in the right direction.
- IMF advocates transparency and governance in the use of resources.
- Democratic Republic of Congo (DRC)
- DRC three‑year IMF program of $1.5 billion is concluding; program credited with contributing to macro stability. IMF open to new program discussions if requested.
- Ethiopia
- No substantive update provided on negotiations; IMF speaker recused and indicated mission chief would follow up.
Structural challenges highlighted
- Revenue mobilization constraints:
- Multiple impediments: informality, technical capacity gaps in tax administration and payment systems, extensive tax expenditures and exemptions, and political constraints on taxation.
- Recommendation: improve tax administration, digitize payment systems, reduce unwarranted tax expenditures, and broaden the tax base while protecting equity.
- Climate shocks and resilience:
- Recent climate events (El Niño, floods) pose heightened risks and underscore need for resilience financing and support.
- IMF’s Resilience and Sustainability Trust presented as a major concessional financing source for climate and resilience needs.
Operational and institutional points
- Debt relief mechanisms:
- Common Framework important for coordinating official creditors; restructurings require time and creditor cooperation.
- No unilateral recognition of preferred creditor status for newly formed multilateral alliances; recognition depends on official creditor practice and institutional characteristics.
- IMF lending posture:
- IMF stands ready to support countries and has adapted policies to provide financing when possible even if creditor negotiations are incomplete, subject to program parameters and staff‑level agreements.
Transcript of African Department April 19, 2024 Press Briefing — IMF Communications Department