IMF’s Christine Lagarde in Niamey, Niger, with President Mahamadou Issoufou during her two-day visit to the country (photo: Stephen Jaffe/IMF)
LAGARDE VISITS AFRICA
Speaking during her first trip to Africa as head of the IMF, Lagarde cautioned that without action to implement a solution, especially in the euro area, the world economy could be swept into a downward spiral of collapsing confidence, weaker growth, and fewer jobs.
Good economic policies in sub-Saharan Africa had provided a platform for progress in the region toward higher growth, more investment, and less poverty, Lagarde told a December 20 meeting in Lagos, Nigeria. But now spillovers from the advanced economies threatened the region, she stated.
Lagarde visited Nigeria and Niger December 18-22 during the first leg of her African tour, and will travel to South Africa January 5–7, 2012, to complete her African trip.
Testing Africa’s resilience
After an effective African response to the food and fuel crisis of 2008 and the global financial crisis that followed, the latest fallout from the advanced economies is testing Africa’s resilience again, Lagarde said in Niamey, Niger.
“The trade and financial ties, so critical to driving our economies forward in good times, have—ironically—become the linkages that can spread today’s escalating economic risks,” she said during a December 21 address to Niger’s National Assembly.
“A sustained growth slowdown in advanced countries, together with continued financial market instability, will dampen demand for Africa’s exports. It may also inhibit private financing flows, remittances, and possibly aid,” Lagarde told Niger’s legislators.
In a statement at the end of her visit to Niger, Lagarde noted pressures on the country from the impact of the crisis in neighboring Libya, and a decline in agricultural production and rising food shortages in parts of Niger. She said the authorities and an IMF team had reached agreement on an economic program for 2012–14 that could be supported with about $123 million under the IMF’s Extended Credit Facility, subject to approval by the IMF’s management and Executive Board.
Deeper partnership
Lagarde stressed during her African trip that the IMF was ready to support its sub-Saharan African members, and to “be a better partner.
“I am committed to a deeper, more fruitful dialogue, with the IMF listening even more carefully to your needs. This will help us serve you even more effectively,” she told the Lagos meeting.
In Niger, Lagarde urged Africa’s governments to channel the continent’s natural resource revenues toward efficient public investments needed for growth and jobs. She said Niger’s rising oil and mining revenues, if used effectively, could help promote more broad-based and inclusive growth.
Lagarde said a key policy objective should be to offset, to the extent possible, Niger’s vulnerability to fluctuating commodity prices as natural resources become a more important source of budget revenue.
“This requires a medium-term approach to fiscal policy that aims to smooth out spending and helps to use the gains from higher prices wisely,” Lagarde told the National Assembly in Niamey. She stressed the importance of saving during good times to help guard against future shocks.
“This means channeling natural resource revenues toward efficient public investments in infrastructure, agriculture, health, and education—investments that will yield high returns and that are needed for growth and jobs,” Lagarde stated.
Oil revenues
Lagarde’s speech in Niger revisited natural resources themes that she also mentioned in Nigeria, Africa’s largest oil producer. Lagarde told the Lagos meeting that Nigeria’s establishment of a sovereign wealth fund and its emphasis on using oil revenues for stabilization and investment were important advances.
Prudent management of natural resource revenues will create room for critical public spending, Lagarde said. “Given the distance still to go to reach the Millennium Development Goals, increasing the resources available to build stronger social safety nets is particularly important, including in areas such as maternal and child care,” she added.
“Promoting a more diversified economy will help Nigeria better withstand shocks. It will also provide for more broad-based growth, with opportunities and jobs for the entire population,” Lagarde said.
The risk of a drop in world oil prices if global demand weakens is the key watch point for Nigeria, Lagarde said.
“Faced with these risks, my main worry is that many countries do not have as much capacity to absorb shocks as they did three years ago. Added to that, the global slowdown could be more pronounced this time around.
“Policies need to tread a fine line between defending against the global slowdown in the near term, while also preserving fiscal resources for investment in much-needed infrastructure that will help promote employment and growth,” Lagarde stated.
Building infrastructure
In an op-ed published in Nigerian newspapers, Lagarde said a priority for many African countries is responding to the growing demand for their bountiful resources and addressing their large infrastructure gaps.
In a statement at the end of her visit to Nigeria following discussions with President Goodluck Jonathan, Finance Minister Ngozi Okonjo-Iweala, and Central Bank of Nigeria Governor Sanusi Lamido Sanusi, Lagarde said the prime objective of her trip was to listen to the IMF’s African members. Her itinerary also included meetings with representatives of civil society and the private sector.
In Niger, Lagarde visited two villages outside of Niamey and also met with representatives of banking institutions and the private sector in the capital city before her speech to the National Assembly.
