The Compact with Africa—The Contribution of the IMF
IMF Blog, June 12, 2017
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- Authors: Christine Lagarde
- Published: June 12, 2017
Purpose and context
- The Compact with Africa aims to boost private investment by harnessing the expertise and resources of governments, investors, and international organizations.
- The Compact seeks to facilitate projects that lift productivity and living standards and create fresh opportunities across Africa.
- The German G20 presidency launched the Compact as an engine for job creation and poverty reduction.
Demographics and labor market challenge
- 70 percent of the population is under 35 years of age.
- Estimated jobs needed: 20 million jobs need to be created in Africa every year until 2035 just to absorb new entrants into the labor force.
IMF priorities and contributions
- The IMF commits to working toward a resilient macroeconomic environment and sustainable debt burdens to create conditions for more and better-paid jobs.
- The IMF is increasing engagement with participating Compact countries, building on long-term relations.
Examples of IMF engagement:
- Tax policy reforms and strengthening administrative capacity to create stronger and more reliable sources of government revenue.
- Revenue aspiration: countries should not aspire to less than achieving revenue gains of half a percent of GDP each year.
- Intended uses of revenue gains: prevent build-up of excessive debt and generate extra resources for investment in health, education, and infrastructure.
- Improving the efficiency of public infrastructure spending.
- Infrastructure investment need: $100 billion per year in investment to close Africa’s infrastructure gap.
- Current shortfall: less than half that amount is being undertaken.
- Growth impact: recent analysis shows that the regional deficit in physical infrastructure reduces growth by 2 percentage points a year.
- Country examples: Ghana, Côte d’Ivoire, and Togo have used IMF expertise and tools to raise public spending efficiency; Morocco, Senegal, and Tunisia to be worked with in the year of publication.
- Supporting financial sector development.
- Areas: building healthy and well-supervised banking systems, macro-prudential policy, managing capital flow volatility in times of distress.
- Objective: greater financial stability to support more private investment and more inclusive growth.
- Strengthening rule of law and institutions, including building defenses against money laundering and the financing of terrorism.
- Country examples: recent IMF engagement in Ghana, Morocco, and Tunisia on AML/CFT matters.
- Capacity development emphasis.
- Capacity development accounts for about a quarter of the IMF’s overall activities.
- Online courses: have attracted almost 30,000 participants since 2013, with the largest share of government participants from sub-Saharan Africa.
- Financial assistance and annual assessments.
- Active IMF-supported programs exist in the first five Compact countries: Côte d’Ivoire, Morocco, Rwanda, Senegal, and Tunisia.
- IMF programs can be fine-tuned to accommodate compact initiatives while protecting macroeconomic resilience and public debt sustainability.
Policy recommendations and required contributions
- For African governments:
- Step up reforms to improve economic, business, and financial climate, and governance.
- For partners (G20 countries, international organizations, investors):
- Support the design and implementation of successful investment compacts tailored to each country.
- For the IMF:
- Continue to play its role in ensuring macroeconomic stability, sustainable debt levels, capacity development, technical assistance, training, and financial support as needed.
Expected outcomes
- Higher private investment and job creation driven by policy reforms, improved infrastructure spending efficiency, stronger financial sectors, and enhanced institutional frameworks.
- More durable and inclusive growth through revenue gains and prudent debt management.
Article by Christine Lagarde — June 12, 2017.
Content in this bundle
- 非洲契约——IMF的贡献, 作者：克里斯蒂娜·拉加德, 2017年6月12日
- アフリカとのコンパクト—Imfの貢献: クリスティーヌ・ラガルド; Imf ブログ2017年6月12日掲載
- „Compact with Africa“
- «Контракт с Африкой» — вклад МВФ; Кристин Лагард; 12 июня 2017 года
