African Finance Ministers Press Briefing
IMF News, October 8, 2016
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- Published: October 8, 2016
Guinea — economic turnaround and priorities
- Shocks experienced:
- Ebola epidemic with "more than 2,000 people" dead and resulting stigma and orphans.
- Decrease in commodity prices leading to stalled growth, double digit inflation, fiscal deficit, and reserves "less than 3 months of import available."
- Recent outcomes (2016):
- Growth estimate: "5.2 percent".
- Inflation reduced to "about 8.4 percent".
- Foreign reserves reconstituted to "almost 2-3 months of imports".
- Energy production doubled; about "25 percent" of the population now has access to affordable and reliable energy.
- Policies and reforms that delivered results:
- Prudent monetary and budgetary policy.
- Treasury accounts opened in some commercial banks to bring "taxpayers and ... collectors" closer and cut intermediaries.
- Better control of spending while directing resources to investment.
- Strategic priorities:
- Address climate change given Guinea's role as source for major rivers (River Senegal, River Niger) and integrate climate considerations into development planning.
- Diversify the economy and integrate regionally.
- Access longer-maturity financing for substantial investment needs while maintaining sustainable debt patterns.
- Strengthen domestic resource mobilization (increase tax and non-tax revenues, mobilize remittances and domestic savings).
- Seek bespoke IMF-supported programs tailored to Guinea's financing constraints.
Zambia — recovery plan and structural focus
- Recent shocks and macro outcomes:
- Commodity shock: "average price of copper has gone down by over 40 percent" in the last year.
- Other shocks: climate change, global risk uncertainty (e.g., Britain voting to go out of the EU, adjustments in China).
- Growth declined from multi-year averages of "7 percent" to estimated "3.2" this year.
- Fiscal and current account deficits, higher inflation, higher cost of money, lower reserves.
- Economic recovery plan structured around five principles:
- Fiscal sustainability: tax administration, compliance, and expenditure control.
- Debt sustainability: historical borrowings equal "35 percent of our total revenue generation."
- Protection of the poor and building equity when implementing difficult expenditure decisions.
- Economic governance: legal and regulatory reforms, better public expenditure management, reorient civil service attitudes from consumptive to productive.
- Budget credibility: "Don’t spend what is not in the budget" and curb off-budget spending and arrears.
- Implementation priorities:
- Address power (hydropower expansion) and transport logistics (rail and road) to enable industrialization and diversification.
- Improve implementation capacity and accountability.
- Engage with IMF and partners under a "Zambia plus" approach that includes the private sector.
Benin — rebalancing GDP and fiscal base through targeted investment
- Shock and fiscal exposure:
- Half of fiscal revenues linked to trade with Nigeria; pressures from Nigerian devaluation affected Benin’s revenues.
- Strategic response during crisis:
- Invest significantly during crisis to build resilience and enable structural reform.
- Rebalance GDP and fiscal structure: agriculture is "20 percent of our GDP but contributes zero to our fiscal revenues."
- Measures taken to mobilize activity and future tax base:
- Defiscalize agricultural activities now to encourage declaration and provide training (costly short-term).
- Eliminate property taxes and inheritance taxes to develop real estate and mortgage markets.
- Promote tourism and agro-food industry leveraging unique national assets (animal park, big five, sea, slave heritage) as diversification strategy.
- Fiscal programming:
- Seeking IMF program support and ad hoc analysis to design reforms and assess the nature of deficits (noting the importance of capital expenditures which may balance operational deficits).
- Target for 2017: first time "a balanced budget" and "capital expenditures are higher than operational expenditures."
South Sudan — large income shock, stabilization needs, and peace linkage
- Nature of the crisis:
- "Extremely large income shock" resulting from political and economic developments and internal conflict.
- Oil production affected; exchange rate and inflation pressures.
- Recent policy actions and macro indicators:
- Agreed with IMF to devalue and liberalize the national currency in 2015.
- Received SDR support: "SDR through 140 million" which was auctioned; later "withdrew from our SDR quota" due to larger management needs.
- Currency lost "80 percent in this last year."
- Inflation was "730 percent last August."
- Budget and reform priorities:
- 2016/2017 budget focus: maintain salary payments, finance the peace agreement, implement economic stabilization reform.
- Measures include increasing revenue, reducing non-essential expenditures, and improving cash management.
- Emphasis on diversifying the economy in the long term.
- Support needs:
- Request for increased international technical assistance and capacity building from IMF and partners.
- Hope to conclude Article IV assessment before year-end and pursue a pathway to a self-monitored program and external financing.
Regional themes: Africa rising, regional integration, and Nigeria's impact
- Africa outlook:
- Ministers expressed continued optimism for Africa while acknowledging recent shocks; emphasized regional integration as key to economies of scale and resilience.
- Concrete regional infrastructure initiatives cited:
- Energy interconnections across West Africa (networks involving Senegal, Sierra Leone, Cote D’Ivoire, and Guinea).
- Southern Africa projects: Kazungula connectivity (Botswana, Zambia, Zimbabwe), hydropower at Batoka (Zambia/Zimbabwe), power links to tap Ethiopia.
- Trade facilitation and lowering transaction costs across borders to raise intra-African trade from "5-6 percent" closer to "20 percent."
- Nigeria’s centrality and spillovers:
- Nigeria’s economic difficulties (currency issues, oil price shock) have direct impacts on neighbors (e.g., Benin: "half of our fiscal revenue comes from Nigeria").
- Nigeria’s oil sector accounts for "15 percent of the Nigerian GDP but 5 percent of their fiscal revenue" — illustrating vulnerability despite oil’s modest fiscal share.
- Ministers urged collective regional action (ECOWAS and bilateral engagement) and massive structural investment to address Nigeria’s crisis and associated security risks.
Financing challenges and policy recommendations
- Financing mismatches:
- Recurrent theme: need for longer-maturity financing for investment versus available short-term resources used for gaps and emergencies (Guinea emphasized the mismatch).
- Policy recommendations across speakers:
- Tailored IMF programs ("bespoke program") that consider country-specific financing needs and less automatic program design.
- Strengthen domestic resource mobilization: increase tax and non-tax revenues, mobilize remittances and domestic savings.
- Prioritize investments in energy, transport, and other infrastructure even during crises to build resilience and enable growth.
- Improve governance, public expenditure management, and civil service orientation to enhance implementation capacity and budget credibility.
- Engage international partners for technical assistance and capacity building, especially where high inflation, exchange rate instability, or post-conflict stabilization are involved.
- Debt sustainability emphasis:
- Monitor and contain borrowing: Zambia noted historical borrowings equal "35 percent of our total revenue generation."
- Balance access to financing with sustainable debt patterns.
Transcript of African Finance Ministers Press Briefing, October 8, 2016 — IMF Communications Department