## Three Propositions on African Economic Growth

_IMF Policy Discussion Papers, June 1, 1995_

## Source details

**Canonical URL:** [Three Propositions on African Economic Growth](https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/three-propositions-on-african-economic-growth-1509)

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## Bibliographic details
- Authors: Pierre Dhonte
- Published: June 1, 1995
- Series: IMF Policy Discussion Papers
- DOI: https://doi.org/10.5089/9781451970357.003

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### Summary
- The paper describes African economic growth and asserts the establishment of a growth-conducive environment is the unifying purpose of the IMF’s extensive involvement in Africa.
- A major purpose of the IMF’s extensive involvement in Africa is to promote high quality growth.
- The IMF’s original perspective on growth is traced to the debate following the debt crisis of the 1980s, when growth was seen as a determinant of the sustainability of balance-of-payments positions and of the viability of a country's payments system.
- Although the elimination of financial instability is essential to remove trade restraints, and thereby to promote growth, growth in turn is necessary if trade restraints are to be averted.
- Anchoring the domestic system of relative prices to the international system through open trading and an equilibrium exchange rate is intended to provide signals to guide the efficient utilization of domestic resources; the approach is ineffective if these signals are blocked by domestic price regulation.

### Key findings and propositions
- Growth is central to the sustainability of balance-of-payments positions and the viability of a country's payments system.
- Eliminating financial instability is essential to remove trade restraints and promote growth.
- Growth is itself necessary to avert trade restraints.
- Anchoring domestic relative prices to the international system via open trade and an equilibrium exchange rate provides signals for efficient resource utilization.
- Domestic price regulation can block the price signals that guide efficient utilization of domestic resources, undermining the benefits of an anchored exchange rate and open trade.

### Policy recommendations (implied by the paper)
- Establish a growth-conducive environment as a unifying objective of IMF involvement in Africa.
- Promote policies that eliminate financial instability to remove trade restraints.
- Support growth-enhancing reforms to help avert trade restraints.
- Anchor domestic relative prices to international prices through open trading and maintenance of an equilibrium exchange rate.
- Avoid domestic price regulation that blocks price signals needed for efficient resource allocation.

### Subjects and keywords
- Subject: Employment, Exchange rates, Foreign exchange, International trade, Labor, Labor force, Production, Terms of trade, Total factor productivity
- Keywords: Africa, CFA franc, economic growth, Employment, equilibrium exchange rate, exchange rate, Exchange rates, investment ratio, Labor force, output ratio, payments restriction, PDP, ratio, Sub-Saharan Africa, Terms of trade, terms of trade loss, Total factor productivity

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_Source: https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/three-propositions-on-african-economic-growth-1509_