Speech

Managing Director of the International Monetary Fund
At a Meeting with African Governors of the IMF
Washington, D.C., October 1, 2004

As Prepared for Delivery

Minister Compaoré, Ministers, Governors, Ladies and Gentlemen:

1. Thank you very much for your intervention. Allow me to use this opportunity to take a look at the challenges facing Africa and my vision for how Africa and the IMF can work together to tackle them. And, of course, we will have enough time for any further issues you may wish to address.

2. In my first few months as Managing Director of the IMF, I have had the opportunity to travel twice to Africa. In Nigeria, Gabon, and Uganda in August, and in South Africa and Burkina Faso in September, the conversations I had with Heads of State and Ministers from over 30 African countries, and also with civil society and the private sector, served to emphasize just how great are the challenges that Africa faces. Poverty remains widespread, conflict is holding back development, and the HIV/AIDS pandemic is taking a devastating social toll with serious economic repercussions.

3. But I was also encouraged to see that there is a concerted effort, by Africa itself, to address these challenges. The past decade has witnessed progress in macroeconomic stabilization in many countries in Africa. Inflation rates have fallen dramatically, and macroeconomic imbalances—reflected, for example, in budget deficits, current account deficits, or domestic and external payment arrears—have moderated. And economic growth performance has improved, averaging 3 ½ percent per year over the past decade compared to 1 ¾ percent during the preceding 15 years. But this progress—welcome as it is—has remained too modest to make serious inroads in combating poverty across the continent. The current global economic recovery represents an important opportunity to make progress in tackling many difficult issues that you face.

4. I am committed to helping Africa seize this opportunity and tackle its challenges. A process of reflection is currently underway assessing the IMF's work with all its low-income members. Rest assured that the intention is to remain engaged over the long term. The objective is to find ways in which the IMF can play its role more effectively. Some efforts are already underway. I believe that the poverty reduction strategy process, with its emphasis on ownership and participation, carries significant promise and should be continued and reinforced. And we are increasing our use of Poverty and Social Impact Analysis, with the objective of integrating it better with our program work. But where the current instruments of the IMF are inadequate, new approaches need to be considered to achieve our shared objectives of growth and poverty reduction in Africa. Discussions are still at an early stage, and I very much welcome the participation of Africa in this process. Allow me to share with you a few key issues currently under discussion.

5. IMF programs and policy advice must take into account the specific challenges facing African countries. We need to make sure that our programs and policy advice are tailored to individual country circumstances. Providing better health and education services is critical to building productive societies that can seize the opportunities offered by global economic integration and ensuring that public expenditure directly benefits the poor. I strongly welcome the commitment by the international community to scale up its efforts and provide more—and better coordinated—assistance to reach the Millennium Development Goals. In some countries that are pursuing strong policies, such as in Uganda, we are already seeing a significant increase in grant assistance. Markedly higher levels of grants will pose macroeconomic challenges, and the IMF's policy advice and programs must ensure that this assistance—including for the fight against HIV/AIDS, tuberculosis, and malaria—is fully taken into account, so that the available resources are productively used. There is also clearly a need for more public investment in infrastructure in many countries. This, too, needs to be embedded in a sustainable public expenditure framework, and we are currently engaged in several pilot studies—including in Ghana and Ethiopia—to improve ways in which this can be done. An area that I believe is of critical importance to many African countries is to use effectively the revenue from their abundant natural resources, including petroleum resources. Some important steps have been taken, including in Chad, the Republic of Congo, and Nigeria, to improve the management of oil resources. The IMF stands ready to work with all its members in Africa to assist in establishing best practices across the continent.

6. Capacity building and technical assistance are critical in strengthening the institutions that are fundamental to a well-functioning market economy. The two IMF regional technical assistance centers (AFRITACs) established in Bamako and Dar es Salaam over the past two years are now fully operational. Covering ten countries in West Africa—namely Benin, Burkina Faso, Cote d'Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger Senegal, and Togo—and six countries in East Africa—namely Eritrea, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda—their close links with the countries they serve is helping to make IMF technical assistance more targeted and effective, and could serve as a model for opening further such centers in the coming years.

7. IMF financial assistance needs to become more flexible and responsive. We are currently working on a variety of ways of ensuring that the IMF can respond quickly and flexibly in case of need. For example, the recently-adopted Trade Integration Mechanism aims to provide rapid support in case of countries facing prospective trade shocks resulting from liberalization under the Doha Round. A more generalized mechanism to tackle exogenous shocks within our PRGF programs will be discussed shortly. And work is currently underway within the IMF and with other multilateral and bilateral creditors to assess the state of the HIPC initiative. Going forward, I believe the dual objective must be to ensure effective debt relief in those countries where it has not yet been achieved, while avoiding a further build-up of unsustainable debt in the future.

8. We also need to sharpen our role in countries that do not need our financial assistance. Countries in Africa that have achieved macroeconomic and financial stability, such as Tanzania and Mozambique, have different demands on the IMF. Timely and high-quality policy advice, as well as technical assistance and capacity-building, will become increasingly important. In addition, I see the need to explore ways in which the IMF can continue to assist its African members by assessing and signaling good economic performance. This issue will be discussed at the IMF's Executive Board before the end of this year.

9. Finally, we are reinforcing our analysis and assistance in support of Africa's regional integration initiatives, which African leaders themselves identified as a key engine for growth at the recent summit of the African Union in Addis Ababa. The semi-annual Regional Economic Outlook for Sub-Saharan Africa, prepared by the IMF's African Department for these Annual Meetings, includes a special focus on regional integration initiatives in Africa and identifies significant scope for progress. Trade liberalization, ensuring regional harmonization of business regulation, and the provision of better regional infrastructure can provide a much-needed boost to private investment. And by reinforcing peer review mechanisms, as envisaged under the New Partnership for Africa's Development, regional integration can also play a valuable role in promoting sound macroeconomic policies and a good investment climate. We are tailoring our own work to support these objectives, including by conducting regular surveillance discussions with the West African Monetary and Economic Union, as well as with the Central African Economic and Monetary Community.

Ministers, Governors, Ladies and Gentlemen:

10. It is natural that during these Annual Meetings, much of our discussions are about the policy requirements for Africa itself and the role for the IMF in helping its African members. But there is no doubt that others must also play their part, including the advanced economies, and the IMF will continue to remind them of their responsibility in two areas in particular: more, and better coordinated development assistance, and improved opportunities for African exports. Improving access for African exports to the markets of the advanced economies, and dismantling trade-distorting subsidies in these markets, are on the table in the Doha Trade Round. This is a critical opportunity to make a significant advance in multilateral trade liberalization that will truly benefit the poorest countries. Rest assured that in this area, the IMF will continue to be your advocate.