Speech

Address by
Alassane D. Ouattara
Deputy Managing Director
International Monetary Fund
at the
Second Tokyo International Conference on African Development
Tokyo, October 19, 1998

It is a great pleasure and honor for me to address this important gathering. This conference offers a unique opportunity for leaders from Africa, Asia, and other parts of the world, as well as international organizations, to reflect together—as equal partners—on how best to promote growth and alleviate poverty in Africa. It is also the culmination of a series of carefully conceived seminars, workshops, and preparatory meetings, from which a number of concrete suggestions and useful recommendations for action have emerged. I salute the Government of Japan, the United Nations, and the Global Coalition for Africa for their leadership, creativity, and patience in bringing this important initiative to fruition. Let me now offer a few thoughts on how Africa should position itself in the months and years ahead to achieve rapid growth and make a real dent on poverty, with help from the IMF and its other development partners.

Accelerating economic growth

Since we met here five years ago for the first Tokyo International Conference on African Development (TICAD I), Africa has made great strides. The rate of economic growth has risen to an average of about 4 percent (and much higher in a number of countries), up from 0.7 percent in 1993. Inflation is now less than 10 percent, down from 30 percent. And overall fiscal deficits have narrowed from an average of some 8 percent of GDP to 4 percent over the same period. But the story is not just one of better economic indicators. In virtually all of Africa, substantial progress has been made in freeing the private sector from cumbersome government controls on prices, marketing, imports, investments, and foreign exchange. Moreover, economies are more efficient, access to markets is more open, and the groundwork has been laid for better integration in the global economy.

These achievements, remarkable as they may be, are certainly not enough. With population growing by almost 3 percent annually, real per capita income is increasing by only about 1 percent per year. This means that the gap between Africa and the rest of the world is still widening. Moreover, because Africa’s population is predominantly young, the number of people seeking jobs is increasing at a much faster pace than that of the population. The bottom line is that real GDP growth of 4 percent will not create enough jobs to reduce unemployment, which is already far too high. Thus, the conclusion is painfully clear. Africa must accelerate, and sustain, economic growth of at least 6-7 percent per year, and take complementary actions to alleviate poverty.

Integrating into the global economy

So what can be done to put Africa on a higher growth trajectory? In my view, the key lies in the further promotion of a market economy, increased and more productive investment, and closer integration in the global economy. I am, of course, keenly aware of the risks of such a strategy—volatile capital flows and contagion from other countries. But these risks notwithstanding, Africa must embrace further integration and avoid the temptation to revert to the old practices of import and exchange controls. For failing to integrate would risk missing the opportunities to benefit from expanded trade and foreign capital needed to complement Africa's low domestic savings. Even after the current crisis, Asia will be much better off than Africa, thanks to the opportunities globalization has brought to Asian countries.

As Africa proceeds with global integration, we must act together, of course, to make markets work better. First, we need to strengthen the architecture of the international financial system. In this regard, we need to enhance transparency and accountability, strengthen financial systems, promote the orderly integration of international financial markets, and involve private creditors to help forestall and resolve crises. Work toward these ends is under way.

Second, African countries should maintain sound macroeconomic fundamentals and accelerate structural reforms that would make their economies less vulnerable to swings in investor sentiment and capital flows. Such reforms should include the establishment of strong and well-supervised banking systems; the maintenance of transparency and good corporate governance; the elimination of cronyism and corruption; the strengthening of administrative and institutional capacity; and the development of reliable and timely economic databases. African countries should also continue the process of opening their markets to foreign capital, but act prudently, in step with the development of their financial markets and the strengthening of their economies.

We at the IMF are also mindful of the risk that market forces could reward disproportionately those who are already better off, leaving the poor with little means to improve their living conditions. For this reason, we have consistently urged all concerned to help develop and support social programs to protect the poorest. To achieve better results, we must all redouble our efforts. For African policymakers, this means reorienting public expenditure away from nonproductive operations and focusing instead on health, education, and other social services; establishing well-designed social safety nets; and strengthening governmental and nongovernmental institutions that deliver social services.For bilateral and multilateral donors, this means increasing their funding of antipoverty programs and the associated institution building. On our part, we are strengthening the focus on social issues in programs that we support under the Enhanced Structural Adjustment Facility (ESAF)—our concessional lending facility—and we are enhancing our collaboration with the World Bank to help achieve this result. Moreover, we are making determined efforts to make ESAF self-sustained, so that we can continue to support Africa into the 21st century.

Lowering the external debt burden

This brings me to the subject of Africa's debt and the need to reduce the debt burden. I am aware that a number of policymakers, including some of you from Africa, believe that the Initiative for the Heavily Indebted Poor Countries—the so-called HIPC Initiative—launched by the IMF and the World Bank does not go far enough. According to this view, the stock of debt should be reduced further; more countries should be eligible for debt reduction; and the waiting period required before the delivery of debt reduction should be shortened. Given the depth of poverty in Africa, and as an African, I can appreciate these sentiments.

But for debt reduction to help Africa in the long run, it must be an instrument that would lead countries to a path of rapid and sustainable growth and a substantial alleviation of poverty. In other words, it should not be an end in itself. More specifically, debt reduction must be extended in such a way that it will help promote sound economic policies and investor confidence; discourage unproductive borrowing practices; ensure that the resources released are allocated strictly to antipoverty programs; and reduce aid dependency. The assurance that debt forgiven will be used efficiently and not wasted is crucial, both to mobilize funding for the HIPC Initiative and to sustain public support for official development assistance in donor countries. This is a delicate task, and this is precisely what the HIPC Initiative is trying to do.

At this stage, seven countries, five of which are African, have already received commitments of debt relief under the HIPC Initiative, and many more could receive such assistance. Recently, in an effort to ensure that the maximum number of countries possible participate, the IMF and the World Bank have extended the deadline for entry to the Initiative to the end of the year 2000, and modified one aspect of the entry requirements to help speed up the delivery of debt relief to post-conflict countries. I urge all eligible countries to take advantage of these opportunities. This means adopting with all possible speed strong adjustment and reform programs that the IMF and the World Bank can support. The countries should then sustain their programs to ensure that they benefit from the debt reduction.

Fostering internal security

Even if external debt is substantially reduced and the right economic policies are pursued, however, we all know that there will be no economic growth if internal armed conflicts persist. It is in this regard that my optimism for Africa has to be tempered, given the resurgence of violent conflicts in many parts of the continent. Are we powerless in bringing about a durable peace in Africa, a continent that has suffered so much from long and bitter internal struggles?

I urge all concerned to do their utmost to end the conflicts swiftly. Moreover, I call on my fellow Africans to work toward establishing the institutions of governance that will foster harmony among tribal and other opposing groups with divergent interests, and that will facilitate the orderly resolution of disputes without resort to violence.

The international community must also strengthen its efforts to help countries emerging from political turmoil, civil unrest, and armed conflict. Certainly, the IMF will continue to do its part within its mandate. In addition to policy advice, our emergency post-conflict assistance policy enables us to provide early financial support and technical assistance to these countries. We are also considering how best to help post-conflict countries that are overdue in repayments to multilateral institutions and, thus, are barred from the financial resources of those institutions.

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In closing, I would like to stress my deeply held belief that Africa needs to better position itself to reap the gains from integration in the global economy while minimizing the risks. In this regard, there is no shortage of lessons to be learned from Asia's impressive gains in recent decades, as well as from its current financial crisis. There is also no shortage of lessons to be learned from Africa's own successes and failures. For those African countries that are undertaking strong reform programs but are adversely affected by the global economic turmoil, we at the IMF stand ready to increase our financial assistance, so that they can cope with the current difficulties without resorting to protectionist measures that would only harm them in the long run.

The proposed Agenda for Action of TICAD II provides an excellent framework for setting policy priorities and coordinating the actions of African governments and the support of Africa’s development partners. Let us all work together to make TICAD II a full success, and in so doing advance the cause of African development.