## IMF Survey : Productivity Is Key to Growth in Small Mid-income Countries

_IMF News, May 14, 2013_

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## Bibliographic details
- Published: May 14, 2013

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### Overview
- Publication: IMF Survey
- Date: May 14, 2013
- Context: Conference held on the sidelines of the 2013 IMF-World Bank Spring Meetings focused on policy priorities for small middle-income countries in sub-Saharan Africa in a rapidly changing external environment.
- Key summary point: Small middle-income countries must boost the contribution of productivity to growth because they can no longer rely on capital deepening as a growth driver; better productivity will also make these countries globally competitive.
- Noted past strengths: Positive growth record raised overall incomes and reflected sound policies including keeping inflation low and pursuing fiscal prudence.
- Concern: Trend growth has softened in recent years; returning to strong growth and transitioning to high-income status requires reform-oriented and innovative policies to boost productivity.

### Better productivity (policy levers identified)
- Improve the effectiveness of public spending.
- Improve the efficiency and effectiveness of the tax system.
- Deepen structural reforms including easing the cost of doing business.
- Minimize the impact of macroeconomic volatility on growth by:
  - Rebuilding sufficient policy buffers to deal with shocks.
  - Reducing dependence on trade taxes.
  - Diversifying the economy and trade.
- Quotation: Cape Verde Finance Minister Cristina Duarte — “We are at a new starting point in our growth process—we need efficiency-driven growth and a shared vision to deliver an innovation-based economy.”

### Financial inclusion and stability
- Observation: Financial soundness indicators are benign in many small middle-income countries, but shadow banking could affect financial stability, particularly given that supervision of this sector is in its infancy.
- Recommendation: Deepen financial inclusion as part of a broader development strategy while preserving financial stability amid rapidly emerging global financial challenges.
- Central bank role: Monitor risks such as elevated levels of household indebtedness at historically low interest rates and respond to new supervisory demands.
- Quotation: Bank of Namibia Deputy Governor Ebson Uanguta — “Striking the balance between financial inclusion and financial stability is particularly prominent in Namibia, which suffers from one of the most uneven distributions of income in the world.”

### Jobs and growth (inclusive growth and labor policy)
- Inclusive growth is desirable but elusive; policies must be flexible and adaptable to country circumstances.
- Labor market policy recommendation: Aim to “protect the worker rather than the job.”
  - Support worker transitions during downturns through social insurance and job training programs.
  - Avoid keeping nonviable industries open merely to protect jobs.
- Role of the state: Provide minimum safety nets while allowing an increasing role for the private sector.
- Quotation: Mauritius Financial Secretary Ali Mansoor described his country’s embrace of measures that protect the worker rather than the job.

### Capacity building (public sector and skills)
- Issue: Relatively large wage bills partly driven by intense competition for scarce skilled labor in the region.
- Policy responses:
  - Wage decompression to allocate higher wages to higher-skilled staff.
  - Motivate skilled staff through nonmonetary benefits such as training abroad.
  - Develop leaner, smarter, and more effective governments to support macroeconomic policy implementation and long-term growth.
- Priority areas for capacity building:
  - Budget preparation.
  - Sound medium-term fiscal framework.
  - Budget reporting.
  - Tax administration.
  - Quality of macroeconomic statistics.
- Objective: Improve quality of public spending and strike an appropriate balance between enhancing financial inclusion and minimizing risks to financial stability.

### Peer support and learning
- Proposal: Use peer support and peer learning to explore synergies among small middle-income countries.
  - Peer-to-peer learning among policymakers.
  - Peer learning among technicians.
  - Capacity building and training institutions as vehicles for peer-to-peer learning.
  - Setting common policy goals with better-performing countries helping those lagging behind.
- Quotation: Mauritius Financial Secretary Mansoor advocated peer-to-peer learning among policymakers and technicians.

*IMF Survey : Productivity Is Key to Growth in Small Mid-income Countries, May 14, 2013*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Conference webcast](http://www.imf.org/external/mmedia/view.aspx?vid=2312439451001)
- [Africa builds momentum](http://www.imf.org/external/pubs/ft/survey/so/2013/CAR051013A.htm)
- [Africa’s dynamic growth](http://www.imf.org/external/pubs/ft/survey/so/2013/CAR042013B.htm)
- [Africa’s homegrown resilience](http://www.imf.org/external/pubs/ft/survey/so/2013/CAR011113A.htm)
- [2013 IMF-World Bank Spring Meetings](http://www-stg-ext.imf.org/external/spring/2013/index.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar051313a_