## Transcript of the October 2019 Annual Meetings African Department Press Briefing

_IMF News, October 18, 2019_

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## Bibliographic details
- Published: October 18, 2019

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### Regional growth outlook
- Growth in Sub-Saharan Africa is expected to pick up:
  - "around the 3.2 percent mark" for 2019.
  - "rising to 3.6 percent in 2020."
- Relative to April, growth has been revised down for about two-thirds of countries this year, "albeit by a modest 0.3 percentage points for the region as a whole."
- Large heterogeneity across countries:
  - Non-resource intensive countries (described as "this 24 or so non-resource intensive countries, home to about a half a billion people"):
    - Expected to grow at "about 6 percent", "almost three times faster than the growth rates" in resource intensive countries.
    - Will see per capita income "rising markedly faster than the rest of the world."
  - Resource- or commodity-reliant countries ("these 21 countries"):
    - Growth "is at around the 2.5 percent mark."
    - In per capita terms, growth "remains lower than much of the rest of the world."

### Downside risks to the outlook
- External risks:
  - Rising protectionism.
  - Potential rising risk premiums for international markets.
  - Faster-than-anticipated slowdown in trading partners (examples cited: China, the Euro area).
- Domestic risks:
  - Failure to implement fiscal policies as envisioned to help stabilize debt levels.
- Country-specific factors:
  - Policy uncertainties holding back investment in some larger economies.

### Policy strategy: three-pronged approach
- Near-term policy mix:
  - Fiscal space is limited in many countries; "the room for supporting growth" mainly lies on the monetary policy side where inflation is below targets and growth is below potential.
- Build resilience:
  - Strengthen public financial management to avoid debt sustainability problems and the buildup of domestic arrears.
  - Balance investment needs with debt sustainability.
  - Continue efforts to diversify economies to reduce reliance on commodity exports.
- Inclusive, labor-intensive growth:
  - Ensure growth remains labor-intensive to create jobs for millions entering the labor market annually.
  - Reforms to facilitate implementation of the AFCFTA now that it has been ratified by most countries.
  - Facilitate competition between firms to raise growth and improve welfare (analytical work in the Regional Economic Outlook highlights significant potential).

### African Continental Free Trade Area (AFCFTA) and intra-African trade
- IMF assessment:
  - AFCFTA described as "one of the most exciting policy developments across the region."
  - Analytical work (April Regional Economic Outlook) shows "tremendous potential" to facilitate higher economic growth and diversification toward manufactured, processed goods traded intra-Africa.
- Implementation challenges to realize gains:
  - Tariff reduction per the agreement plus removal of non-tariff barriers.
  - Address infrastructure constraints that hamper trade.
- Estimated impact on intra-Africa trade:
  - Trade would be increased "by at least -- close to, between 16 and 20 percent, or so, as a result of the AFCFTA."
  - Additional gains possible when accounting for shifts toward manufactured goods and value-added trade.
- Distributional concerns:
  - Risk that larger economies may dominate; policy measures needed to support sectors and regions that may face dislocation.
  - Competition with external partners (e.g., China, Europe) also a consideration.

### Trade tensions, global slowdown, and supply-chain shifts
- Conjunctural impact:
  - Africa has been affected by the global slowdown in trade volumes; softness in exports contributed to lower regional growth.
- Medium-term opportunities:
  - Early signs of relocation of low-skill manufacturing to parts of Sub-Saharan Africa (example cited: Ethiopia and some coastal eastern seaboard countries).
  - The pace depends on how quickly Asian countries move up the technology ladder and how rapidly African countries attract capital.

### Debt, financing, and China
- IMF stance:
  - China is a "very important development partner" for many Sub-Saharan African countries.
  - IMF concern centers on overall debt levels and the sustainability of borrowing regardless of creditor.
  - Key issues:
    - What the borrowed funds are used for (ability to capture rate of return on infrastructure, health, education investments).
    - Striking a balance between development needs and avoiding debt unsustainability.
- IMF engagement modalities:
  - Programs with financing where requested.
  - Policy advice to all countries.
  - Capacity development, including debt management, on request.

### Country cases and specific issues
- Nigeria:
  - Slow growth despite policy initiatives; implementation of the ARGP and policy reforms is critical.
  - Need to increase non-tax revenues to fund infrastructure, education, health; non-tax revenues remain "very low at 7/8 percent" in the country.
  - Monetary policy: inflation dynamics discussed in context of Nigeria; IMF referenced "11.7 inflation rates by 2020" in the question and attributed inflation drivers to adjustment to lower commodity prices, exchange rate shocks, and food-price related shocks. Recommended continued central bank efforts to bear down on inflation and allow gradual decline.
  - Poverty and inequality:
    - Large within-country variation in poverty and social outcomes; region-specific interventions and higher overall growth needed.
    - Diversification away from oil, better business environment, and more resources for infrastructure, health, education are priorities.
- Mozambique:
  - Hidden debts over $2 billion led IMF to require three elements before re-engagement:
    - Explanation/audit of the debts and transparency (audit has been completed).
    - Restoring debt sustainability.
    - Agreement on a program with supporting policies.
  - IMF provided emergency support after Cyclone Idai and continues policy engagement; no outstanding request for program engagement at the time of the briefing.
- Cabo Verde:
  - IMF spokesperson was "not aware of the transaction" referenced regarding hidden debts of 65 million and said they would try to find out.
- Ghana (banking sector clean-up):
  - Costly financial sector clean-up (nearly 12 billion Ghana cedis; collapse of about seven banks) underscores importance of strong supervision and real-time regulation.
  - Not cleaning up the sector risks even higher eventual fiscal and economic costs.

### Regional monetary integration and insecurity
- ECOWAS common currency:
  - Leaders and the ECOWAS commission have set out preconditions (including convergence criteria); IMF encourages following the laid-out steps and conditions.
- Xenophobic attacks and insecurity:
  - Recognized as a serious challenge with risk of spillovers and loss of life; policing, containment, and improved mutual understanding are needed to prevent escalation and protect trade relations.

### Climate change, natural disasters, and resilience
- Recent climate shocks cited:
  - Cyclone Idai and Cyclone Kenneth.
  - Drought in Southern Africa affecting countries like Zimbabwe and Zambia.
  - Desertification in the Sahel and population movements linked to climate pressures.
- IMF role and priorities:
  - Provide rapid support in the aftermath of shocks.
  - Support policies and investments to build climate resilience and more climate-resilient state capacity and infrastructure.
  - Encourage countries to pursue investments and policies that increase resilience while balancing debt sustainability.

### Health, pandemics, and preparedness
- IMF role:
  - Not a health specialist, but works to ensure countries have resources to invest in health systems, education, and infrastructure.
  - Past experience: support to Liberia during the Ebola outbreak; countries with stronger health systems (e.g., Nigeria) were better able to contain outbreaks.
- Policy priority:
  - Upgrade health service provision and state capacity so economies are more resilient to pandemics.
  - Ensure sufficient fiscal resources through taxes and borrowing to fund health investments.

### Monetary and fiscal policy calibration under external headwinds
- Fiscal policy:
  - Limited fiscal space in many countries; priority on stabilizing debt levels.
  - If severe global slowdown materializes, IMF would consider recalibrating fiscal plans (e.g., delaying planned adjustments by a year or two) while ensuring medium-term debt reduction.
- Monetary policy:
  - More room in many countries on monetary policy as inflation trends have generally declined; use monetary policy where appropriate to support growth.

### Miscellaneous statistics, events, and recommendations
- Conference announcement:
  - IMF, together with the government of Senegal, will host a conference on Sustainable Development, Sustainable Debt, on December 2nd in Dakar, aiming to identify policy proposals to balance development needs and avoid debt vulnerabilities.
- Key quantitative figures preserved from the briefing:
  - Growth projections: "3.2 percent" (2019), "3.6 percent" (2020).
  - Regional revision: "0.3 percentage points" downward for the region as a whole.
  - Non-resource intensive growth: "6 percent".
  - Resource-intensive growth: "2.5 percent".
  - Number of resource-intensive countries: "21 countries".
  - Description of non-resource intensive grouping: "this 24 or so non-resource intensive countries, home to about a half a billion people".
  - AFCFTA trade uplift estimate: "between 16 and 20 percent, or so".
  - Nigeria non-tax revenues: "7/8 percent".
  - Reference to "11.7 inflation rates by 2020" as cited in the briefing exchange.

*Transcript of the October 2019 Annual Meetings African Department Press Briefing, IMF Communications Department, October 18, 2019*

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## References

- [Ghana and the IMF](http://www.imf.org/external/country/GHA/index.htm)
- [Nigeria and the IMF](http://www.imf.org/external/country/NGA/index.htm)
- [Republic of Mozambique and the IMF](http://www.imf.org/external/country/MOZ/index.htm)
- [The Federal Democratic Republic of Ethiopia and the IMF](http://www.imf.org/external/country/ETH/index.htm)
- [Transcripts](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2019/10/19/tr101819-transcript-of-october-2019-african-department-press-briefing_