Africa Rising - Building to the Future, Keynote Address by Christine Lagarde, Managing Director, IMF
IMF News, May 29, 2014
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- Published: May 29, 2014
Introduction & Mozambique’s Journey
- Delivered in Maputo, May 29, 2014; keynote by Christine Lagarde, Managing Director, International Monetary Fund.
- Mozambique highlights:
- Average growth of 7.4 percent per year over the past two decades.
- Major steps taken to reduce poverty and raise life expectancy.
- Recent discovery of natural resources presenting opportunities to make growth more inclusive.
- IMF engagement with Mozambique:
- Financial support, policy advice, stepped-up technical assistance and capacity building.
- Continued partnership emphasized.
Where We Stand—Africa’s Takeoff
- Broad regional performance:
- Sub-Saharan Africa growing strongly and steadily for nearly two decades.
- More than two-thirds of the countries in the region have enjoyed ten or more years of uninterrupted growth.
- Africa is a growing investment destination with a record $80 billion inflow expected this year.
- Social and human-capital gains:
- Significant declines in infant mortality and increased education attainment.
- In Benin and Madagascar, primary school enrolment has increased by more than 50 percentage points.
- Remaining gaps:
- Poverty still afflicts about 45 percent of the region’s households.
- Inequality remains high; some countries continue to face recurring conflict and fragility.
- IMF institutional changes and capacity development:
- Reformed lending instruments to increase access and flexibility; extended zero-interest policy; streamlined conditionality.
- Tailored policy advice and support via five regional technical assistance centers in Gabon, Ghana, Côte d’Ivoire, Mauritius, and Tanzania.
- Today, the largest share of the IMF’s capacity development services is devoted to Africa.
Challenges Ahead—Near-term Worries and Longer-term Challenges
- Near-term worries (three main risks):
- (i) Slower growth in advanced economies and in particular emerging market economies that are major trading partners for Africa.
- (ii) Lower prices for some commodities.
- (iii) Tightening external financial conditions and potentially increased market volatility as monetary policy is normalized.
- Longer-term challenges:
- Demographic:
- By 2040, the continent is projected to boast the largest labor force in the world—1 billion workers strong—more than China and India combined.
- Harnessing this reservoir of human capital requires skillful management and vision.
- Technological:
- Technological innovation can support global integration, improve productivity, and foster inclusion; the challenge is effective and efficient harnessing.
- Environmental:
- Climate change and sustained demand growth pressure natural-resource sustainability and can exacerbate inequality and exclusion.
Building to the Future—Three Policy Priorities
- Overview: Three priorities—build infrastructure, build institutions, and build people.
- Build infrastructure
- Key shortfalls:
- Over the past three decades, per capita output of electricity in Sub-Saharan Africa remained virtually flat.
- Only 16 percent of all roads are paved, compared with 58 percent in South Asia.
- Investment needs and examples:
- Investment needs for the region are estimated at about $93 billion—annually.
- Examples of scaling up: energy investments in Ethiopia and Mozambique; regional projects in Kenya and Côte d’Ivoire for electricity, roads, and railroad networks.
- IMF support:
- Strengthening public investment and debt management capacity through capacity building centers and on-the-ground technical assistance.
- Build institutions
- Focus on governance, transparency, and sound economic frameworks to ensure resource endowments benefit broad-based development.
- Challenges with extractive industries:
- Mining can account for a large share of output and export earnings but often contributes relatively little to budget revenues and job creation; rents can be captured by a few.
- Policy responses and examples:
- Strengthen institutional and governance frameworks that manage resources and increase transparency and accountability.
- Sierra Leone and Uganda setting new fiscal rules in anticipation of large resource flows.
- Côte d’Ivoire implementing a new legal framework for the mining sector to attract higher foreign direct investment.
- IMF role:
- Bringing cross-country experience and continued technical assistance.
- Build people
- Labor-market and inclusion challenges:
- By some estimates, a one percentage point increase in the working age population can boost GDP growth by 0.5 percentage points.
- Today, only one in five people in Africa finds work in the formal sector.
- Human-capital investments:
- Wider access to quality education, healthcare, and infrastructure services to support formal private-sector job creation.
- Technology and financial inclusion:
- Kenya: combining mobile banking with financial services provision has resulted in 75 percent of Kenya’s population now having access to financial services, with the poor benefiting most.
- Gender and girls’ education:
- Women are largely in informal activities with low productivity, low incomes, and limited prospects; constraints include access to education, credit, and markets.
- Economic loss from the education gap between girls and boys could be as high as $90 billion a year in developing countries.
- Recommendation: invest in women—high economic and social returns.
Conclusion
- Africa is undergoing a momentous transformation; the outlook is optimistic compared with five years earlier.
- The opportunities are vast; challenges can be overcome through sustained strong economic and social policies.
- Priority actions: work together for inclusive, job-rich, and sustainable growth; extend gains to those left behind by helping overcome fragility and build strong institutions.
- Closing metaphor: “Pedra a pedra construindo um novo dia.” Stone by stone, building a new tomorrow.
Keynote Address by Christine Lagarde, Managing Director, International Monetary Fund, Maputo, May 29, 2014.