IMF Survey: Better Business Climate Can Soften Crisis Impact on Africa
IMF News, April 22, 2012
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- Published: April 22, 2012
Overview: ministers' assessment and priorities
- African finance ministers at the 2012 IMF-World Bank Spring Meetings said faster domestic policy reforms that encourage foreign investment would help maintain sustainable and inclusive growth.
- Ministers highlighted that rising global commodity prices were making Africa’s food and energy imports significantly more expensive.
- Policy responses emphasized:
- Improving the business climate through fiscal reforms.
- More efficient domestic farm production to replace imported foodstuffs.
- Enhanced regional integration and intraregional trade to accelerate import substitution.
Country reports and specific developments
- Mozambique (Finance Minister Manuel Chang):
- Reported lower foreign trade volumes, declining export prices, a drop in foreign investment, reduced aid flows, and falling remittances as a result of the global economic crisis.
- Response: addressing falling foreign investment by improving the business climate through fiscal reforms; stimulating startups and job creation to counter falling remittances.
- Noted membership: Southern African Development Community promotes intraregional trade.
- Mauritius (Finance Minister Xavier-Luc Duval):
- Mauritius sends 65 percent of its exports of sugar and textiles to European consumers, who were reducing demand.
- Expected subdued tourism and foreign investment for the year.
- Government actions: diversified the economy and reformed the tax structure to make conditions more business friendly.
- Result cited: Mauritius being the first African country to make the top 10 in the Heritage Foundation-Wall Street Journal Index of Economic Freedom.
- Burundi (Finance Minister Tabu Abdallah Manirakiza):
- Experiencing impacts on growth and budget from the global financial crisis.
- Authorities advancing a second-generation poverty reduction strategy and focusing on tourism development.
- Noted improvement: rising in the rankings of the World Bank’s Doing Business report.
- Burkina Faso (Finance Minister Lucien Marie Noel Bembamba):
- Promoting growth via a new Strategy for Accelerated Growth and Lasting Development.
- Recent successful donors conference interpreted as a sign of international confidence in government policies.
- Reforms include strengthening economic governance and promoting efficient management of government spending.
- Observed policy aim: reduce operating costs to free up resources.
- Noted link: membership in the West African Economic and Monetary Union represents a link to the euro area.
Policy recommendations and measures highlighted
- Business-climate reforms:
- Fiscal reforms to improve investment conditions.
- Tax-structure reforms to make conditions more business friendly.
- Agricultural and trade policy:
- Increase efficiency of domestic farm production to substitute for imported foodstuffs.
- Maximize intraregional trade to protect from global crises and accelerate import substitution.
- Regional integration and investment promotion:
- Speed regional integration and remove nontrade barriers.
- Implement double taxation agreements and investment promotion pacts between countries.
- Encourage inter-Africa trade via regional economic groupings (e.g., Southern African Development Community).
Key messages
- Faster domestic reforms that encourage foreign investment are central to maintaining sustainable and inclusive growth.
- Diversification, fiscal and tax reforms, and regional integration are presented as primary tools to soften crisis impacts and foster resilience.
- Intraregional trade and improved domestic production can mitigate higher import costs from rising global commodity prices.
IMF Survey: Better Business Climate Can Soften Crisis Impact on Africa — April 22, 2012