Transcript of African Department Press Briefing
IMF News, April 15, 2016
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- Published: April 15, 2016
Regional performance and outlook
- Growth for sub-Saharan Africa fell to 3.5 percent in 2015, "the lowest level in some 15 years."
- Projected growth for the region in 2016: "about three percent."
- Both 2015 and 2016: "GDP per capita growth will be below one percent."
- Medium-term prospects: "drivers of growth ... over the last decade generally continue to be in place," notably "the much-improved business environment and favorable demographics."
- Semiannual Regional Economic Outlook for Sub-Saharan Africa to be published on May 3; launch events in Kampala and Abidjan.
Key shocks and transmission channels
- Commodity-price shock:
- Oil prices remain "more than 60 percent below their 2013 peak levels."
- Oil exporters (Nigeria, Angola, most CEMAC countries) facing "particularly difficult economic conditions."
- Forecast for the region's oil exporters: growth slowing to 2.5 percent in 2016 from 6 percent in 2014.
- Non-energy commodity exporters affected: Ghana, South Africa, Zambia.
- External financing:
- "For most of the region's frontier markets, external financing conditions have tightened substantially, compared to the period until mid-2014."
- Weather shock:
- "Several Southern and Eastern African countries, including Ethiopia, Malawi, and Zimbabwe, are suffering from a severe drought" with food-security risk.
Country-specific developments and assessments
- Mozambique:
- Authorities confirmed "the existence of a large amount of borrowing that had not previously been disclosed to the IMF."
- The "undisclosed borrowing exceeds $1 billion and significantly changes our assessment of Mozambique's macroeconomic outlook."
- Known lenders identified so far: Credit Suisse and VTB Bank.
- IMF mission for reviews (policy support instrument and standby credit facility) cancelled "pending a full disclosure and assessment of the facts."
- Angola:
- Oil dependence: "95 percent of its exports on oil and 70 percent of government revenues."
- Angola made a formal request in March for a "three year program under the extended fund financing facility"; discussions and a mission expected to follow.
- Nigeria:
- Growth decline: "Growth has ... come down, considerably in Nigeria, to some 2.5 percent or so, last year, from what used to be closer to 6 percent."
- Revenue-to-GDP ratio: "only about 7.5 percent."
- Policy observations:
- Authorities are focused on governance and expanding non-oil revenues.
- Exchange-rate measures: initial devaluation followed by administrative restrictions on foreign exchange access; IMF notes these restrictions "have been detrimental" and are "at odds with Nigeria's commitments as an IMF member country in terms of exchange restrictions."
- Monetary policy: "recent increase in the policy rate" noted as encouraging.
- Ghana:
- IMF view: "we have been quite satisfied and encouraged with the implementation of the program in Ghana."
- Fiscal performance: "the government has made quite an effort to stick with the targets under the program and the fiscal is on track."
- Debt management: sovereign bond issuance increased financing costs but was "consistent with the debt management strategy" given domestic financing was more expensive at the time.
- Zambia:
- Authorities expressed interest in an IMF-supported program; preparatory work underway.
- Full preparation of a program expected "in the fourth quarter of this year, after the elections in Zambia."
- IMF advice: contain a "huge fiscal deficit," adjust spending (current spending and wage bill), and prioritize "high quality investments."
- South Africa:
- Growth outlook: IMF estimate "about 0.6 percent in growth this year."
- Challenges: commodity-price declines (platinum and others), rebalancing in China, electricity constraints, structural reforms needed (product-market competition, labor market, education and skills).
- Fiscal stance: recent budget seeks to "balance the needs to make sure that macro-stability prevails, but at the same time also trying to mitigate the impact on growth."
- Market confidence affected by political developments (Finance Minister changes in December; subsequent appointment of Minister Gordhan).
- Cameroon:
- Debt sustainability: status changed to "high risk of debt distress" following recent non-concessional borrowing, including a sovereign bond issued at "very elevated rates."
- IMF/World Bank advice: streamline investment program and seek more concessional financing to sustain debt levels.
Policy recommendations and priorities
- For commodity exporters:
- "Respond to the lower export earnings and budgetary revenues promptly and robustly, to prevent a disorderly adjustment."
- Contain fiscal deficits and "build a sustainable tax base from the rest of the economy."
- For countries outside monetary unions:
- "Exchange rate flexibility as part of a wider macroeconomic policy package should also be part of the first line of defense."
- For market-access countries with elevated deficits:
- Adjust fiscal policies to "rebuild scarce buffers and mitigate vulnerabilities."
- On borrowing and transparency:
- Any undisclosed debt-related transactions "need to be reported transparently and publicly" to ensure accountability and allow accurate macroeconomic assessment.
- On growth-supporting policies:
- Combine fiscal, monetary, and exchange-rate policies coherently with structural reforms to support recovery and inclusive growth.
Transcript of African Department Press Briefing, April 15, 2016.