September 23, 2005
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MS. BHATT: Thank you for coming. Ladies and gentlemen, I'm Gita Bhatt from the External Relations Department of the IMF, and I would like to welcome all of you to the press conference. I know there are a lot of other competing events.
I'd like to introduce the panel members. In the center, we have Mr. Abdoulaye Bio-Tchané, who is the Director of the IMF's African Department. To his left is Mr. Siddhart Tiwari, the Deputy Director of the African Department. And to my left is Ms. Benedicte Christensen, who is also a Deputy Director of the African Department.
Mr. Bio-Tchané will give a short statement, and then, we can take questions from you. And again, as usual, if you would introduce yourselves and give your affiliation.
We do have simultaneous interpretation if there is anyone who needs it. French is on 3, English is on 4, and Spanish is on 2. It's on the side of your chair. We will make copies of Bio-Tchané's opening remarks available both in French and English after this briefing. Mr. Bio Tchané?
MR. BIO-TCHANÉ: Thank you, Gita. Welcome again, ladies and gentlemen. As Gita said, we will circulate the text of my statement later of the representation, and second, I gather you have received copies of the outlook itself. So I will keep myself to the key messages we have from that outlook.
The first message is obviously that the growth performance in Sub-Saharan African countries remains strong. We have for this year an average growth rate of 4.6 percent, despite high oil prices, international cotton prices that remain low, and third, the removal of textile quotas. On that front, I would like to say that one-third of oil importing countries are expected to see growth in excess of 5 percent of GDP, and that is really important and includes countries as diverse as Ethiopia, Mozambique, and Sierra Leone. This resilient growth performance has been obviously helped by the pickup in activity in South Africa, where the growth rate has increased and in many other countries.
The second message we can take from this outlook is that inflation remained under control. As you know, last year, for the first time in almost 25 years, inflation has dropped to a single digit. We are still at that level, and therefore, the inflation is really broadly under control in most of the countries.
The third message is that the prospect of growing for next year is also very good, with growth rebounding to 5.3 percent from the 4.6 percent I mentioned earlier for this year, 2005.
Fourth message I would like to take from this outlook also is that food insecurity remains a serious problem in many countries in Africa, particularly in West Africa, the Sahel region, you have seen in Niger particularly but also in countries like Chad, Mali, and recently, Cameroon was also mentioned. But also, we have the same situation in the Southern region, Zambia and obviously Zimbabwe.
The fifth message I would like to draw from that outlook is also that despite that relatively strong performance in growth, the performance is way insufficient to meet the MDGs, and that's really an important message we want to draw from this outlook.
Finally, obviously, the way forward is to pursue the reforms that have helped the countries to reach that level of growth rate, to cut back on inflation, and first, obviously, macro stability; second, we expect the discussion on scaling up to yield more aid for the countries that obviously will help the countries to spend more effectively those resources. The way forward also is on trade reform, continue the efforts, particularly in the frame of the Doha Round discussions, and we expect that by the end of this year, there will be a tangible result on that front.
And finally, actions, really, to create a more conducive environment for the private sector development should continue, and we hope that with that, the growth performance will remain sustained and maybe improve to reach the MDGs.
So these are really the key messages I want to draw your attention on, and we are ready to take your questions.
QUESTION: Could you just comment on some of the expectations that you expect out of further trade negotiations? You comment in the outlook--you have this little chapter on preference erosion and the Doha Round. What are you expecting, and what is a likely scenario out of further trade negotiations?
MR. BIO-TCHANÉ: Thank you very much for your question on trade. You know, the main issues being discussed that are of great interest in the African countries are clearly, the issues of access and subsidies. And we expect that during the next round, the discussion will yield more result on that. You know that there is an important aspect on agriculture and particularly on cotton, where the West African countries, the four West African countries have put forward some proposals that have been discussed, and we hope that during the next discussion and hopefully before December, there will be a new momentum to reach some agreement on that.
But obviously, apart from that discussion, there are other avenues of progress that needed to be pursued for the African countries. First, trade among themselves, and that is really important. And as you know, there are issues like infrastructure, but also on policies how to dismantle the barriers between the African countries themselves and finally the issues of the trade arrangement, the various trade arrangements that are quite cumbersome for the African countries. That is an issue that the countries need to address again.
QUESTION: Are we seeing any sort of economic impact yet from the high oil prices in Africa? My other one is on South Africa. What is your reading on inflationary pressures in South Africa, and do you think monetary policy is adequate right now.
MS. CHRISTENSEN: In terms of South Africa, as you know, the last two years, South Africa has stayed within its inflation band of 3 to 6 percent. There are certain inflationary pressures in the economy coming from rising domestic demand, also higher oil prices, and somewhat expansionary monetary policy. You cannot preclude that that interest rate would need to be raised at some stage during the year, but so far, the authorities have managed very well to stay well within the band.
MR. TIWARI: On oil, I think if you look at 2004 and 2005, in 2004, the terms of trade impact on Africa was negligible. So even though you had an impact in terms of oil of about 2 percentage points of GDP, it was sustainable, manageable, because commodity prices rose hand-in-hand. The picture for 2005 will be different. The terms of trade impact, as we see it, is likely to be in the range of 3.5 percent. It will lead to a slight dip in growth. The final impact will depend on how much fiscal consolidation there is and what is the exchange rate policy.
QUESTION: Have there been any discussions or considerations of debt relief?
MS. BHATT: Can we take a couple other questions? Yes, this gentleman there?
QUESTION: This morning, the Emerging Markets magazine reported an interview with the Central Bank Governor of Nigeria about a debt deal, about the rising disquiet in the country. People feel dissatisfied that it wasn't a good deal with the Paris Club. Do you have any comments on this? Thank you.
QUESTION: Let me take, as a follow-up to the question, actually. The President of the World Bank and the Managing Director of the IMF did indicate in their opening press conferences that the debt deal will be concluded very soon. They didn't give any specific date, actually. But when it is concluded, if and when it is concluded, what impact is that likely to have on the poor African countries that are going to benefit from the debt deal?
MR. BIO-TCHANÉ: Okay; let me take the general question on debt relief, and as you mentioned yourself, the Managing Director has addressed the question during his press conference, and I will refer you to that, because mainly, he has given the appropriate response from this institution. That is that the issue is still being discussed, and we expect an outcome in the next few days or so. But clearly, the outcome is--the expectation of the countries are there, and the outcome will clearly be positive.
You have seen also the figures from the G7 discussion. It could be at the end more or less different from those figures, but the numbers you have from the G7 discussion were almost $40 billion U.S. for the group of countries considered at that time, which means more or less $1.5 billion per year for that group of countries. So that is what I have got to say.
On Nigeria, do you want to take it?
MR. TIWARI: On Nigeria, all I can say is that the Paris Club has indicated that they will enter into negotiations on a phased debt deal with Nigeria. At this moment, we are fully supportive of the Government's program that it has put forward. It is strong; it is ambitious; it is robust.
QUESTION: If I could throw a double whammy at you here, surely, many of these African countries are already budgeting for this debt deal. Are they already doing that? So, you know, any delay in the debt deal, will that affect any of the, you know, the budgets? Or are you advising them just to wait until there has been a final deal to actually write that in?
The other question is on Zimbabwe. Has the IMF requested information from Zimbabwe on where they got the money to pay off the Fund? Is that something you would do? And how would you conduct that? You know, how would you look at that? If Zimbabwe borrowed the money, you know, what impact would that have to the money, or, you know, where did they take the money from, how would that impact the prospects of recovery for the country?
QUESTION: You were talking, Mr. BIO-TCHANÉ, about agricultural subsidy reforms, the importance of agricultural reforms to many African countries. But a lot of them, I suspect most of them in this region, are actually current net food importers. So how concerned are you about the possibility, at least, of some transitional losses as a result of subsidy reform in the OECD? And how confident are you of there being some sort of supply response from African agriculture if these kind of reforms do go ahead?
MR. BIO-TCHANÉ: Let me start with the question on the subsidies. Clearly, theoretically, we believe that the African countries will benefit from the lifting of the subsidies, and it's been sufficiently documented. But on the other side, the challenge is clearly there that they need to reform those agricultural sectors that are unable to seize the opportunities that will be created by the lifting of the subsidies.
Just let me take the example of cotton. If you take the cotton sector in Africa, particularly in West Africa, the yield is almost one ton per hectare, whereas in other countries, particularly in Asia and in Latin America, you have countries producing already 10 tons per hectare.
So obviously, if you lift the subsidies today, the countries that will benefit from that will first be the other countries and least the African countries. And that is one of our advice to the African countries is to say, well, you need to continue, obviously, that battle on lifting the subsidies, but you need at the same time to address the efficiency of your agricultural sector. You need to reform the sector, you need to improve the way you work, and you need to modernize your agricultural sector.
The second question I would like to take is the question on debt relief and budget. There is no, as of today, decision on debt, so our advice to our countries and to our colleagues from the African countries is to ask them to be prudent and wait until we have a deal and until we have the detail of a deal, because they don't know yet, and we don't know yet what is the configuration of the decision and how much that deal will yield for each of them. So I think we all need to be prudent here, and that is the basis of our advice.
Zimbabwe, do you want to say something on that?
MR. TIWARI: Yes, as you know, the Board recently considered Zimbabwe. It deferred the decision to recommend compulsory withdrawal for another six months. There are two areas where they need to strengthen cooperation: that's payments and policies. On payments, they have had a stronger track record. Policies in Zimbabwe, it's two-pronged. One is the standard fiscal, monetary policies, exchange rate and structural reforms and another prong is to strengthen governance to improve the investment climate and the rule of law.
I guess your question goes to the second prong: was this a voluntary submission of resources? There have been some newspaper articles where people have alleged that there was expropriation of funds. Our understanding now is that this was a voluntary submission of proceeds. The Board has, of course, asked us when we get back to them next time to verify the source of funds. Money is fungible. It is something we need to talk to the authorities about. Also, it is something the authorities need to address themselves in a transparent and open manner, and I hope they will do soon.
QUESTION: If there is a decision on the quotas and a weighting on them, would that necessarily be in favor of Africa? Because as I understand, if the countries are judged according to their economic performance, Africa may even stand to lose some. How do you view this?
QUESTION: Right; still on the debt deal, the Paris Club Nigeria debt deal, my colleague actually asked a question. I think I want to put it in another way so that maybe you understand it better. Now, the deal says the Paris Club is going to write off part of Nigeria's debt, maybe to the tune of $20 billion or something like that, and by that, Nigeria is expected to pay at least $6 billion and then buy back part of the remaining. We are asking: is that a good deal for Nigeria, for a poor country to pay out that huge amount at a go? And my other question is this a projection about what is going to happen in Africa next year, the remaining part of the year and next year, if the debt deal is concluded for Africa, is it going to affect the projections made here, especially the growth, the inflation rate, in any way?
QUESTION: I want to find an update on Angola. You know, how close are you to any sort of agreement there, and what are the issues standing in the way?
MR. BIO-TCHANÉ: Well, on quotas, yes, I think first, you have seen also the Managing Director's statement on quotas and representation, particularly when he was discussing the strategy preview and his vision for the institution. What I could say is that how this benefits the African countries will depend on how, in the end, the reform is shaped, whether you get more basic votes or not, for instance, will benefit the Africans. So that is what I can say at this moment on that. There is no, as you know, there is no consensus yet on how to proceed, and therefore, I think it is really a speculation to say in which direction and how much the African countries could benefit from this.
On Angola, I think at this stage, what we are discussing with Angola is how to proceed from an SMP, a staff monitoring program, to a PRGF, and that is what we are discussing. There is nothing that I could mention today that is holding the discussion. We have had a mission there. We are waiting for the authorities to react, and we will use the discussion during these Annual Meetings to see how much we can proceed in that direction. On Nigeria?
MR. TIWARI: Yes, I think any debt deal which is a voluntary agreement between a debtor and a creditor is better for both sides. I think clearly both sides are eager to move in that direction, and it is hard to come to the conclusion that you came to.
MS. BHATT: We will take one last question.
QUESTION: Ms. Christensen, can you please comment on the Fund's view on events in South Africa in the political arena, where there is a sort of mobilization of left-wing elements in the ruling party behind the former deputy president Jacob Zuma and whether that is going to, if not derail, certainly slow any particular labor market reforms that have been proposed in discussion documents, whether you sort of see that being, sort of holding back any improvement on the labor market reforms?
MS. CHRISTENSEN: As you know, the Fund staff doesn't comment on political developments in our member countries. So far, the Government has moved forward with labor market reforms, and obviously, there are different views on the degree of labor market reforms, including on wage negotiations procedures and so forth.
But I think the Government has taken sort of a multipronged approach, and it is addressing various issues at the same time. I mean, the labor market, the current rate of unemployment and the labor market issues have several roots, including the mismatch between skilled and unskilled labor. There are also certain, probably, rigidities in the wage negotiation structure at the moment, and there are several issues that need to be addressed, and I think the Government is moving prudently but forward towards addressing these issues.
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