Press Release: African Consultative Group Meeting: Statement by the Chairman of the African Caucus and the Managing Director of the IMF

IMF News, April 17, 2016

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Canonical URL: Press Release: African Consultative Group Meeting: Statement by the Chairman of the African Caucus and the Managing Director of the IMF

Co-chairs: Mr. Abdoulaye Bio-Tchané (Chairman of the African Caucus) and Ms. Christine Lagarde (Managing Director, IMF).
Meeting location: IMF Headquarters, Washington.
Date: April 17, 2016.
Key macroeconomic finding: "Growth in Africa is projected to decline to about 3 percent in 2016, the lowest level in a long while."
Cross-country variation: "Low-income countries in sub-Saharan Africa continuing to grow by over 5 ½ percent."
Drivers of the slowdown identified:
- Sharp drop in commodity prices.
- Tighter financial conditions.
- Structural causes, including "the ongoing rebalancing of demand in China" and, for oil, "technological innovation that has enhanced supply."
- Non-economic shocks: "weather- and security-related challenges" posing downside risks.

Immediate fiscal stance:
- "Prompt fiscal adjustment is needed to safeguard macroeconomic stability and rebuild policy buffers across the region, especially in oil-exporting countries."
- During consolidation, authorities should "aim at protecting priority expenditures, such as social expenditures and well-prioritized and efficient infrastructure spending."
Exchange rate and monetary policy:
- "Where feasible, the exchange rate should be allowed to adjust as needed to absorb shocks and improve competitiveness."
- Central bank interventions should be "limited to mitigating disorderly market movements."
Structural reforms and diversification:
- "Reinvigorate the economic diversification agenda."
- Stepped-up structural reforms to improve the business environment, labor and financial markets, and opening to trade are critical for "boosting economic prospects, creating jobs, and improving living standards."
Investment and growth preservation:
- Emphasis that public investments have helped preserve positive growth; avoid abruptly slowing "the economic dynamism impulse by public and private investment."

African Caucus expectations:
- Countries "look to the Fund not only to continue its effective engagement with Africa, but also to adapt its instruments and financial support to the magnitude of the shocks experienced by African countries."
- Suggested avenue: "increase access to the general resources of the Fund for low-income countries."
Policy areas for country focus going forward:
- Maintain macroeconomic stability.
- Strengthen institutions and the business environment.
- Address critical infrastructure gaps.
- Expand access to financial services.
- Ensure growth is "both broad-based and inclusive."
IMF commitments (Ms. Lagarde):
- The IMF "will remain closely engaged with its African members."
- Forms of support: "policy advice, technical assistance and capacity development, and—where appropriate and needed—financial assistance."
- The IMF "will continue to strengthen the analytical underpinnings of its policy advice and instruments and seek to adapt to meet the evolving needs of the membership."

The African Consultative Group comprises the Fund Governors of a subset of 15 African countries belonging to the African Caucus and Fund management; it was formed in 2007 and meets at the time of the Spring Meetings.1

Press Release No. 16/172 — IMF Communications Department, April 17, 2016.