Transcript

With Mr. Abdoulaye Bio Tchane, Director, African Department;
Mr. Siddharth Tiwari, Deputy Director, African Department;
Ms. Benedicte Christensen, Deputy Director, African Department; and
Mr. Anupam Basu, Deputy Director, African Department
International Monetary Fund
Washington DC, April 25, 2004

Lucie Mboto Fouda: Good morning, ladies and gentlemen. I am Lucie Mboto Fouda from the External Relations Department of the IMF, and I would like to welcome all of you to this press conference of the African Department.

We have here today to discuss with you to my immediate left, Mr. Tiwari, who is Deputy Director in the African Department; to his immediate left is Mr. Bio Tchane, the Director of the Department; to his left is Mr. Basu, who is also a Deputy Director, and Ms. Christiansen, Deputy Director.

As usual, this conference will be live.

I would like you to introduce yourselves and give your affiliation before you ask your questions, please.

Now, Mr. Bio Tchane, you have the floor for your opening remarks.

MR. BIO TCHANE: Well, good morning, ladies and gentlemen. I'd like to welcome you all here to our press conference today.

I will say a few words of introduction on the Spring Meetings' importance for the Fund's work in Africa and then speak on recent economic developments and prospects in the continent before, obviously, taking your questions.

First, on the theme that we are getting from the IMFC Meeting yesterday, you have heard the communique issued after the meeting and the statement made by the Chairman of the IMFC, together with the Acting Deputy Managing Director Ms. Krueger.

Several important themes that are clearly relevant to the continent stand out. First, economic performance in many low-income countries continues to improve, but achieving the Millennium Development Goals is at risk, especially in Sub-Saharan Africa, and much remains to be done. Stronger domestic institutions, sound macroeconomic policies, greater trade integration, and less burdensome regulations will be needed to increase growth and reduce poverty.

Important steps at the regional level have been taken, including for the New Economic Partnership for Africa, the NEPAD, and the African Union, to strengthen institutions and improve governance.

Additional and coordinated assistance from the international community, including increased aid, continued debt relief, and greater access to underserved country markets are essential.

The meeting also reaffirmed that the Monterrey Consensus and the Poverty Reduction Strategy Paper, the PRSP, approach provide the appropriate framework for the Fund's engagement with low-income countries and our role in helping countries achieve the MDGs. We will continue to work with our own member countries and with our colleagues in the World Bank to tighten the linkage between the PRSPs, the Poverty Reduction and Growth Facility, the PRGF, for low-income countries, and the MDGs, and ensure that they serve as a useful tool for donor coordination.

Coordination between the Fund and the World Bank will be deepened. Substantial progress has been made in providing debt relief under the Enhanced HIPC Initiative. In recent weeks, three additional African countries—Niger, Senegal, and Ethiopia—have reached the completion points, leading to additional debt relief totalling $850 million. This brings to nine the number of African countries that have benefitted fully from the HIPC Initiative.

We expect the pace of implementation of the Initiative to remain strong this year and to continue to bring into the Initiative those countries that have not yet reached the decision point.

The Fund, of course, will continue to make progress in enhancing our support of low-income countries by better tailoring the Fund's financial support to the needs of specific countries. This includes stronger surveillance for countries that do not need Fund financing. For countries that do borrow from the Fund, it will be important to continue to improve the macroeconomic design of our programs, including the social impact, as well as to ensure adequate financing capacity for the PRGF to help meet low-income members' financing needs.

Let me come now to the regional outlook.

I would now like to turn the discussion to the recent economic developments in Africa and prospects for the period ahead. I encourage you all to take a copy of our recent report, "Sub-Saharan Africa Regional Economic Outlook." It is this document. I guess Lucie has distributed it to our friends.

Our analysis indicates that a significant number of countries continued to experience strong growth in 2003, while for others, reasonable and sustained growth rates remained elusive.

Real GDP in Sub-Saharan African countries was 3.4 percent in 2003, in line with 2002.

Experiences among countries differ widely. In general, oil-producing countries experienced strong growth in 2003, led by Nigeria, while non-oil-producing countries as a group had slower growth, leading to stagnation in real GDP.

The global economic environment provided little stimulus to Africa in 2003, with world demand lagging world GDP growth; and the overall terms of trade for Africa remained largely unchanged.

One lesson here is that domestic policies matter. Economic growth remained brilliant in a number of non-oil-producing countries with relatively strong policy environments—for example, Burkina Faso, Mozambique, Tanzania, and Uganda.

Inflation remained low in most countries, which is quite an achievement and in our view a sign that sound macroeconomic policies have increasingly taken hold in many countries.

Clearly, politics and security also matter. Some countries lost ground in 2003, and many of these countries experienced political crisis or conflict. While progress on peace efforts had a substantial impact in favoring economic stability in certain countries, notably the DRC, the Democratic Republic of Congo, and Liberia, in a number of countries, the political and security situation deteriorated.

The human and economic cost of such conflict is immense and can take years to overcome. Regarding other macroeconomic developments in Africa, overall external balances were largely unchanged in 2003 while fiscal balances improved slightly. The main fiscal challenge now for most African countries is how to increase spending on key poverty-reducing programs while ensuring that the stance of fiscal policy is sustainable and consistent with macroeconomic stability.

Looking forward, we expect real GDP growth to rise above 4 percent in Africa in 2004. As a starting point, we expect that the projected increase in world economic growth and demand for imports will provide a modest boost to growth in Africa in 2004, aided by a small increase in Africa's terms of trade.

This outlook rests on some key assumptions, including favorable weather, some progress in conflict resolution, and a strengthening of policies by countries. Our projection has been achieved before and is in line with the effective increase in global growth.

Consistent with the stronger policy stance, we expect inflationary pressures to ease further in 2004.

On a final note, I would underline that Africa's central challenge remains one of markedly accelerating growth above the recent trend level, while strengthening institutions and enhancing poverty reduction efforts. I want to stress that the Fund is committed to work with its members in Africa toward sustaining macroeconomic stabilization and laying the basis for stronger growth. Our dedicated staff will continue to work with the World Bank, bilateral donors, and civil society to ensure that Sub-Saharan Africa makes important progress toward achieving the MDGs, which is essential to making a significant dent in poverty.

As for this Department, the African Department, which I head, we have recently reorganized the department to provide better services to our members. In particular, we are making a strong effort to improve the design of our programs to focus more on cross-cutting issues in Africa and to bring these lessons into our country work as well as strengthen our capacity building for technical assistance in member countries as well as our outreach efforts.

I am therefore grateful for Fund Management, in an era of frugal budgeting, that has also provided more resources for additional staff in the Department.

With this introduction, I would like now to take your questions, and my colleagues who are here will help me answer these requests. Thank you.

Lucie Mboto Fouda: Thank you, Mr. Bio Tchane.

Before we take questions, I would like to mention that copies of the Regional Economic Outlook for Sub-Saharan Africa are available at the entrance of this room, on the table, for your convenience.

Now let me turn to the room for any questions that you might have for the Head of the African Department and his colleagues.

QUESTION: Can you comment on the statement yesterday from the African Ministers that Africa's voice is not being heard here in the IMF, including the fact that the African Department needs more resources, is being underfunded?

MR. BIO TCHANE: On voice or representation, I think this is clearly an issue that is in the hands of the shareholders, first, in the hands of our Board. It is fair to say that it has been partly addressed by the Board by centering the administrative capacity of the African constituencies. But on representation in the Board and increasing quota and all the other aspects, it is really in the hands of our shareholders, and clearly, what I could say at this stage is that there is no wide constituency to change the status quo, and therefore, we are waiting to hear from our shareholders.

As far as the African Department is concerned, I just mentioned in my introductory remarks that we are reorganizing the Department, and one of the ideas is clearly to step up our efforts in providing more resources to the Department working on Africa. To give an example, we have just been provided by our Management an increase in staffing by 10 percent, and as I said, in an environment where we have a zero percent increase in staffing across the board in the Fund.

So it is clearly showing a sign that the Fund is really committed to increasing its work in Africa, to giving more resources to the Department working in Africa. So it is clearly in advance a response to the African Ministers' request.

But I must add that increasing the resources is not enough. We need to reorganize ourselves in our policy advice to the African countries, and that is really the purpose and the main objective of this reorganization—strengthening the policy advice by setting up a policy within the Department—that's what we have done, and Mr. Basu on my left here is in charge of leading that area—but also strengthening our work in the countries by streamlining the review process, reorganizing and having in place a better accountability process in the Department and in our work in the countries. And that is clearly the aim of the work we have done in reorganizing our operations wing in the Department, and on my right, Mr. Tiwari will spearhead that work.

So clearly, this is what we are doing, and it is a part response to the request you mentioned yesterday.

Siddhath was reminding me that I left a question. In that reorganization, of course, as I said, it is not enough to have more resources; you need to allocate the resources, well-allocate the resources; you need to make sure that they are spent in the right direction; you need to make sure that you have the best people to work on African countries. And my colleague on my left, my Deputy, Ms. Christensen, will be heading that wing, and I can tell you that we are thrilled because we are already seeing some results in that.

QUESTION: I am just wondering what you think is the main reason for the rising poverty rate in Africa, when you think those rates might start to decline. And also, vaguely connected—what do you think are the impacts of the agricultural subsidies in the Western world?

MR. BASU: Let me say that there is of course a whole set of structural factors, longstanding, that has affected the poverty situation in Africa.

Let me just begin with the extremely poor initial conditions of infrastructure, road systems, health, education. All of this has been very poor initial conditions for starting the growth process compared with other regions of the world.

The second point I would like to make is that the bulk of Africa's population is in the rural sector. The developments on agricultural productivity have not been the way one would have wanted for growth rates to pick up. A lot of effort needs to be put into the rural sector to raise productivity there.

And then, certainly, there is the issue of what is needed to therefore make headway in dealing with poverty in the future. One, I think we are beginning to see Africans themselves resolve some of the conflicts that are seen in the Continent. We hope that more progress will be there with African institutions, with AU at the leadership, spearheading that process, with NEPAD and that initiative, also in its peer review mechanisms, helping to put in place governance structures that are strengthened.

Second, I think, as Mr. Bio Tchane emphasized, continued reliance on strong growth-supporting policies, and with heightened emphasis on pro-poor expenditures and pro-poor programs, would be an essential element.

Then, I think what you yourself mentioned—it is time, for development partners to come forward on their pledges under the Monterrey Consensus, both to remove trade-distorting subsidies, broaden market access, and provide the necessary aid flows that will go with the reform efforts that the African countries are now making to address the MDGs and address the primary issue of eradicating poverty.

So in essence, that is where we stand. Looking into the future, I think there are in the short term, fortunately, good prospects for a pickup in global growth, and I am sure that with these elements that I have talked to you about—stronger programs, stronger focus on MDGs and poverty reduction—there will be signs of a pickup in African growth rates.

QUESTION: Could you please tell me if Mr. Abdoulaye Wade, the President of Senegal, was right about the failure of the NEPAD initiative, and what your Department has accomplished so far in that matter?

MR. BIO TCHANE: Well, I haven't heard that statement. When was that?

QUESTION: Wednesday.

MR. BIO TCHANE: This Wednesday? Well, I still haven't heard it.

But let me tell you that we have a lot of expectation, of course, on the NEPAD. First, because the NEPAD Initiative is also the African response to the Monterrey Consensus. As you know, the Monterrey Consensus is based on the two-pillar approach whereby the developing countries are doing their part, what they have to do, particularly in strengthening governance, fighting corruption, and so forth. And then, on the other side, the development partners provide more resources, market access, and others.

That is really basic approach of the NEPAD also, that the Africans want to take the issues in their hands, starting from conflict resolution and conflict prevention.

So I think that on our side, and it is our approach, that the Fund is committed to work with the NEPAD leaders. For instance, we are participating in the forum set up to support the NEPAD approach. My colleague, Mr. Delphin Rwegasira was in Mozambique a week ago to attend the Africa Forum meeting on the NEPAD. In substance, we have set up, for instance, the AFRITAC initiative, the two African Technical Assistance Centers in Africa, one in Dar-es-Salam, the second one in Bamako, to support the request by the NEPAD leaders for more capacity-building initiatives in Africa.

Second, we are supporting the African Development Bank and African institutions on financial sector development, for instance, because the African leaders stated themselves that the African Development Bank is their institution to implement the financial sector reforms. And in other areas, we are really committed to working with the African leaders to support the NEPAD approach.

So while we are doing this, I will not expect, and I hope what you said is not true, that the African leaders themselves are not really reneging their words on the NEPAD approach. But I say it again—I have not heard it, and I suppose it's not true.

QUESTION: How important is successful conclusion of the Doha Round for African growth prospects? And, just following up on the issue of the agricultural sector and subsidies from developed economies, Mr. Basu highlighted a whole bunch of challenges that Africa faces. If we could separate the issue of agricultural subsidies from developed countries, how much of an impact is that having on growth and growth prospects in the Region?

MR. BASU: Let me just say that there is a whole range of studies on the impact of removing subsidies and enlarging market access and liberalizing agricultural trade from the side of the developed countries. Figures range anywhere from almost 10 times what the aid flows are right now to Africa. So I can't give you hard figures for it, but I can assure you that the range of figures is well beyond whatever aid flows we are now looking at.

If you look at simply the figures that went around on aid flows soon after or in connection with the Financing for Development Conference in Monterrey, figures were between $50 to $76 billion, I guess, but those are not going to be anywhere near the huge amount of gains that one could get by liberalization through the Doha Round.

So I think that's something that has enormous prospects. Now, as to whether in fact we need to make progress in that direction, I don't have to tell you yes, it is absolutely sure. Our institutions are behind prodding every partner in every part of the international community to progress on this front, and we remain committed to asking for that progress with urgency.

MR. BIO TCHANE: Let me add that this is an issue that has been addressed also by Jim Wolfensohn during his press briefing the day before yesterday. It is obviously an important one for us; it is an important one for the African countries.

The figures are really clearly showing how much lifting the subsidies could have an impact on the African countries. But it is also true on the other side that we need to see progress in trade in the African countries themselves, trade among the countries themselves, lifting trade barriers—I have seen a study, for instance, in the ECOWAS, showing clearly that you have so many barriers in daily exchanges between the countries that it is not really worth doing something.

So I think this is clearly an area where we need to see progress within the African countries themselves, and this is an issue that the Africans are discussing among themselves, and this is an issue that we need to insist on while we are talking about trade.

I think the credibility of the statement on lifting trade barriers, lifting trade subsidies, is increased if action is taken within the African countries themselves.

QUESTION: You have talked a bit about the trade impact of subsidies. What about the impact of tariff escalation—to what extent do you think there are African businesses that would be—or, would there be African businesses in a position to take advantage of improved access or for processed raw materials if it were available in the markets of the developed world?

MR. BASU: Certainly I think that is an area that also requires attention. For so long, Africa has basically been relying on exports of primary products and raw materials, and I think there is enormous scope for moving into subsequent early stages of processing.

Just to give you an example, one can look at numerous instances across the world where coffee producers have moved on to processed coffee, where tea producers have moved on from leaf to auctioning just plain tea products of different kinds, where tobacco producers have done similar things across the developing world.

Indeed, removing those barriers is a strong signal, but not the only signal. They need to be combined with domestic policies and progress on a number of fronts that encourage domestic producers in the private sector to move in, along with foreign investors, and that has to do with institutional environments—institutional environments in the legal area, enforcement of contracts, property rights, regulatory environments that are less burdensome, which was mentioned in the IMFC.

So there is a mix of policies within which the one that you mention stands out as critical, and I think it is wrong to just simply say let's not address it because there are no prospects. That is absolutely not the case.

MR. BIO TCHANE: Good morning, Andrew. Just to add to the response provided by Anupam, I think there is clearly a prospect for some countries, say, coffee producers, cotton producers, who could expand into textiles, for instance. And I heard clearly President Museveni discussing that openly, that he just doesn't want to stay a raw cotton producer or a raw coffee producer. So this is clearly something that a lot of African countries are looking at.

Lucie Mboto Fouda: If we have no more questions, I would like to thank Mr. Bio Tchane, Mr. Tiwari, Mr. Basu, and Ms. Christensen, and I would also like to thank all of you for coming.

I hope that we will be able to do this exercise on a regular basis for you to receive first-hand information from people who handle this on a daily basis.