Transcript of the Press Conference on the Regional Outlook for Sub-Saharan Africa
April 21, 2006International Monetary Fund
April 21, 2006
Abdoulaye Bio-Tchané, Director, African Department
Benedicte Christensen, Deputy Director, African Department
Siddharth Tiwari, Deputy Director, African Department
Michael Nowak, Deputy Director, African Department
Frances Hardin, Sr. External Releations Officer, External Relations Department
|View a Webcast of the Press Conference|
(From left to right) Mr. Nowak, Mr. Tiwari, Mr. Bio-Tchané, Ms. Christensen, and Ms. Hardin
MS. HARDIN: I would like to inform broadcasters that broadcast-quality video sound bites from the briefing will be available this afternoon at www.thenewsmarket, or you can simply do a Google search on Newsmarket and then search on IMF.
English and French version of the press release will be available immediately after the close of the press conference. Also, we have available on the table at the entrance the conclusions from yesterday's conference on the challenges of the scaling up of aid.
Now, for our distinguished panel. To my immediate right, Benedicte Christensen, Deputy Director of the African Department. To her right, Abdoulaye BIO-TCHANÉ, Director of the African Department. Next, we have Siddarth Tiwari, Deputy Director of the African Department, and finally, Michael Nowak, also, Deputy Director from the African Department.
We'll begin with a statement from Mr. Bio Tchané and then take questions.
MR. BIO-TCHANÉ: Thank you, Frances.
Good morning, ladies and gentlemen and colleagues. I am really happy to present to you this morning our latest report on the regional outlook, and the report covers three main areas: recent macroeconomic developments, and second, financial sector issues, and finally, decentralization.
Let me then make a few remarks on the outlook, and then, we will take your questions. First, I am pleased to tell you that at 5.3 percent, economic growth in Sub-Saharan Africa continued to be very strong in 2005, four countries having reached 7 percent of GDP growth: Burkina Faso, Ethiopia, Mozambique, and Sierra Leone, and important countries in the continent having also performed quite well: South Africa with 5 percent growth rate and Nigeria with 6.9 percent growth rate last year, and in Nigeria, growth coming both from the oil sector and the non-oil sector.
At the same time, inflation increased only slightly to 10.7 percent, partly as a result of high oil prices, and this inflation rate includes the outline inflation rate of Zimbabwe, as you know, running close to 1,000 percent inflation rate. If you discount, of course, Zimbabwe, you still have a single digit inflation rate in 2005, which, as we said last time, is really an historical low now since 2004.
And of course, as we stated several times, this growth rate is still far below what is required to reach the MDGs. We need at least 7 percent growth rate to reach the MDGs, particularly reducing poverty by half. For 2006, we expect closely the same performance, both on inflation and growth rate.
On the positive side, increased debt relief will certainly help maintain the growth rates together with some of the policies being implemented in Africa now, and of course, on the down side, we have some of the same issues of political risk and civil strife that have been mentioned in our previous discussion here.
To maintain and accelerate the growth rate in Sub-Saharan Africa, of course, further reforms are needed, and the report highlights three areas of main effort. The first one is that African countries need to develop a comprehensive strategy to meet the macroeconomic challenges of scaling up aid. We discussed this yesterday and the day before at this very important seminar. And those efforts include really sound public expenditure management, good governance, and of course, proactive measures to both supply responses in the countries.
Second, and it's really very well documented in the report for the first time, high priority should be given by countries to comprehensive reform in the financial sector, which, as you know, is the least developed in the world today. And of course, you cannot expect really substantive growth, let alone development, if you don't have access to financial services, and that is really the bottom line.
African countries need to tackle constraints on access to savings and credits, including constraints arising from weak property rights, unclear land titles, and balanced provision of funds to the governments. Reforms are also needed to eliminate distortions stemming from interest rate controls, directed lending, and supervisory focus. Effort also should be directed to reduce distortion and inefficiencies from regulation.
Finally, African countries need to make fiscal decentralization work better. As it is increasingly used to improve the efficiency of public expenditure, countries should strengthen budget controls and track and publish budget allocation, particularly in the local and state level. To preserve macroeconomic stability, the central governments must enhance coordination with subnational governments in formulating budgets and enforce rules for subnational borrowing.
So this is my short statement. We are ready now to take your questions. Frances.
MS. HARDIN: If you have a question, please identify yourself and your news organization. Bill.
QUESTION: Bill McQuillen with Bloomberg.
With these things that you have outlined that should be done to increase growth, has there been feedback, have other countries, have they been receptive to these proposals, or are these things at which some countries are better than others as far as following along? I guess what I'm trying to get at is the likelihood of these proposals being implemented by African governments.
MR. BIO-TCHANÉ: Yes, we were together in Equatorial Guinea recently, three weeks back, and in Zambia, and I think you attended the workshop we had in Zambia. Both from the group discussion and earlier discussions we've had and continuous, actually, discussion we have with the authorities, it's clear most of them are aware of the challenges they face, and obviously, no one single minister or central bank governor is waiting for us to help them identify the issues they are facing.
But clearly, this means that not only they are aware but also some of them are already taking steps to address the issues. And if you look closely at the individual cases in the continent, you will see—take Zambia, for instance; take Mozambique; take Tanzania; take other countries like Mali, Burkina Faso. They are clearly implementing some of the policies we are discussing now.
So I think at the continent level, we are clearly seeing some good responses from the authorities. Obviously, there are a few other cases where we are still faced with very important challenges, and clearly, Zimbabwe is one of them. We have mentioned it in the report, and you can see it also from the data on inflation, on GDP growth rates and other policy areas.
So clearly, in short, my response is yes, we are clearly seeing some good reactions from the African authorities. We need to see more in the areas I mentioned, not only in the financial sector issues but also in the overall business environment in the continent. Take labor market reforms that are very crucial. Take access to property rights, as I mentioned, for the financial sector but also related to the business environment.
So there are areas where we are seeing progress. There are clearly other areas where the challenges are there and the authorities need to take more steps. Trade is also one important area where we need to see more areas, not only—more progress, not only within the Doha Round discussion but also in the domestic agenda for trade for the African countries.
MS. HARDIN: Yes, your name and news organization, please, in the back row.
QUESTION: My name is Samuel Famakinwa of This Day newspaper.
The current high oil prices giving some countries in the Gulf of Guinea, I mean, some good outlook in terms of, I mean, Nigeria, Sao Tome and Principe, Angola, which also has contributed to the growth that has been recorded. But what effect do you think this is going to have on other Sub-Saharan Africa countries that high oil prices are going to be affecting seriously?
MR. BIO TCHANÉ : First, I think we can take from what we have seen in the last two years the lesson that African economies have pretty much weathered the high oil prices and the increased oil prices. You can see it not only in the inflation rate but also in the GDP growth rates that we haven't seen the type of shocks the countries faced in the seventies and the eighties when we had the oil shocks.
And this is coming mainly from two things. One is that you have not seen, we haven't witnessed the same trade imbalances in the continent that we witnessed in the early seventies and eighties, because some of the other commodities have seen a price increase: take gold, take copper and others.
At the same time, and this is the most important part of the response, most of the countries, an increased number of African countries have taken steps to address their domestic problems, not only in fiscal but also in structural reforms.
So that is of help, and also, the fact that they have, in the meantime, built a high level of reserves have helped them over the recent oil price increase. So my response on that is that we expect the same thing to happen, particularly on the policies side, and therefore, we are less concerned by that part of the issue.
We are more concerned about how to accelerate growth rates in the countries: what are the ingredients to get a more sustainable rate, an increased growth rate in most of the countries? The countries I mentioned earlier in my presentation, in my statement, are not oil producing companies. I talk about Ethiopia; I talk about Mozambique; I talk about Burkina Faso that witness 7 or more percent of growth rate. These are countries that are performing quite well that are not producing oil, and of course, other countries that are all oil exporting countries, as can be seen, are less performers. Nigeria witnessed a 6.9 percent growth rate, and certainly, you can quote Angola or Equatorial Guinea in the same way.
Anything you want to add?
MS. CHRISTENSEN: Maybe two points: I think the increase in oil prices last year, and to some extent, also, we see it again repeated earlier this year has been partly mitigated by increases in other commodity prices.
Now, this is, of course, for certain countries and not in all countries in Sub-Saharan Africa. But we have seen high copper prices, high cocoa prices, et cetera. And therefore, if you look at our publication and look at the terms of trade for non-oil producing Sub-Saharan African countries, it deteriorated by 3.7 percent only last year, despite a very large increase in oil prices.
The second factor I would just mention is the good demand for African products. I mean, Africa has also benefited by the growth rate in the rest of the world.
MS. HARDIN: Yes, Lesley.
QUESTION: Lesley Wroughton from Reuters.
Two questions: one is do we have any idea where these countries are investing these newfound profits? Are they holding onto them, or are there some investments overseas? The other question is on Chad. You have just had a mission in Chad. Is there any—and as you know, the political situation going on there and the dispute with the World Bank. Do you think that there is some opening for Chad to—or some way that Chad can divert some of these profits it's getting from oil into the needs that it's facing today?
MR. Nowak: Well, yes, let me perhaps respond to the first question, which related to where the windfall profits, if you like, from the oil revenues are going. And quite simply, we are seeing the oil producing countries increasing their reserve positions fairly dramatically. So the short answer to your question is that it is reflecting the buildup in reserves. These reserves, in turn, are invested typically in fairly short-term assets, such as U.S. Treasury bills, three- to six-month paper and various assets like that.
QUESTION: What about countries that are profiting from high metal prices? Where are those going as well?
MR. Nowak: That's a similar story. We're seeing, for example, countries like South Africa, Zambia, whose reserves are increasing quite significantly as a result of the increase in commodity prices.
MR. TIWARI: I will take the question on Chad. There were recent discussions between the World Bank, other donors, and the Government in Chad. There is an outline of a way forward that centers around macro stability, transparency, sound budgetary management and the use of oil resources for poverty reduction.
I think the donors have never said that the security needs of Chad are not legitimate. For every country, security of its borders and security of its citizens are paramount. It needs to be addressed. On the other hand, oil revenues also need to go to reduce poverty.
And that's a balance that needs to be worked out. It's my understanding, as you know yourself, that President Wolfowitz will talk to President Deby in the next week or two weeks to move this process forward.
QUESTION: Can I have another one, please? So do you think that the concerns are legitimate in Chad, that you need to think about how you use these profits, these oil revenue profits more effectively?
MR. TIWARI: I think the challenge in Chad, as it is in all oil producing countries, is how do you use oil revenues, as you put it, more effectively. In Chad's case, the problem on the eastern border complicates the situation, and it is imperative that the security needs are addressed; yet, oil resources are used for poverty reduction. And that balance needs to be found. The government has a role in this; bilateral donors have a role in this.
MR. BIO TCHANÉ: And just to follow up on that, you know, the equation we and all of the people who are discussing with Chad and other oil producing countries are struggling with is how to use effectively oil revenues in poverty related expenditures, and more than that, how to use oil revenues to fight poverty.
It's just really not acceptable to see oil revenues increasing while poverty is increasing. That's the equation we have to solve, and I think the authorities, ourselves, the World Bank, the other donors are involved in that, and I think we need to find the right balance.
MS. HARDIN: Yes, in the back row, please.
QUESTION: Yes; as a follow up to the last question in terms of using increasing oil revenues to fight poverty or to attack poverty, there is a great concern. I mean, Nigeria is supposed to be exiting the Paris Club today if everything goes well. And the whole of that—the bulk of that money is coming from the excess crude, I mean, the revenue from the excess crude, and there is this debate back home that there are so many infrastructural problems that need to be attended to, and they have been, I mean, ignored while we concentrate on using that money to pay the Paris Club debts. I don't know what—I mean, what is your take on this?
MR. BIO TCHANÉ: Well, thank you. I think one important thing we should stress, and maybe if I were Nigerian I would celebrate is that for the first time in this country's history, we are seeing reserves increasing while oil prices are going up.
If you are familiar with Nigeria's history as I am, I think, this is the first time it is happening. And this is happening because we have the policies in place. This is happening because not only at the Federal level but also at the state and local level, all the authorities have accepted to implement this route of saving the windfall of oil resources.
Now, how do you use that? I think you need to use it efficiently. It's an asset. You use it, you can use it to buy back part of your debt, and I think the decision of the authorities to buy back their Paris Club debt is a welcome one; at least we support that. I think also the authorities are investing—and you can see it in the budget numbers—are investing a lot in infrastructure, not only at the Federal level but at the state level.
In the last year's budget, the authorities have increased, have actually used half of the windfall of the year before investment in infrastructure and social expenditures. So I think there is a balance between those things you are discussing: pay back your debts and have a sound basis for future development but also build infrastructure and attend to social needs at the same time, because you have the resources for that. But there is a limit to what you can do in the short run, and I guess that's what the authorities are struggling with, that we need time to build roads; we need time to restore electricity in a very efficient manner, and I know it is an important issue in Nigeria.
You need time to build health centers and schools, and these are all things that I know the authorities are trying to attend to, and I think the first step to use part of the resources to buy back the Paris Club debt was a good move, and we support it.
MS. HARDIN: In the front row, please.
QUESTION: [Inaudible] with the African Sun Times.
I'm wondering, and I would like to have your input on that, if there is a parallel between democracy and development and also a parallel between natural resources, for a country to have natural resources and development. And I would also like to have Mr. BIO-TCHANÉ's input on the fact that two of his friends were elected, like [inaudible] in Benin, a well-known economist, and also [inaudible] here in Washington, D.C. What will the Fund do to help him to gather the 15 billion euro he needs to fulfill the road map? Please answer my questions.
MR. TIWARI: I'll take the first one. Abdoulaye will take the second one.
I think experience in the last 10 years has been clear that development has been deeper and more permanent when it has been embedded in the PRSP process. And that is the link that development has to democracy and the voice of the people. You can take views on a given political structure or not, whether it's conducive, or it's not conducive, but in the end, what is owned by the government and the people stays longer.
And I think what is clear is that the PRSP process is central. Our programs are being increasingly aligned with that process. They are not fully aligned right now, and it is a challenge for us to move in that direction.
MR. BIO-TCHANÉ: Well, I think to follow up on Siddarth's comment, I will say that the democracy and economic development have to go hand-in-hand. I mean, if you have democracy, and you don't have economic development, there will be challenges and maybe crises. There will be certainly more risks. And that is what we are seeing in some of the places.
And certainly, we have been continuously advocating, empowering, you know, the people who are deciding, and that is what the PRSPs are about. Let the people decide on what are the priorities of the country. At the same time, when you look at the issue of decentralization, that's exactly what we are seeing at the same time: decentralize to let the people who have the needs decide on what are their own priorities. Do they need water? Sanitation? Or do they need health care centers, given the limitations on resources?
And that is what that is. I don't know from that perspective if an economist is best placed than a pure politician to respond to those challenges. What I see is what you are mentioning, whether it is in Benin, Cote d'Ivoire, or even South Africa before, more recently in Malawi that you have economists being elected.
But the challenge is the same for them. Of course, they are coming from an economist's background. Therefore, they know the economic problems. But they have other challenges: build a cohesive society, reinforce the democratic process.
So I think there is no simple response. The problems and the challenges are there. They need to be attended to, and whether you are an economist or a philosopher, you have to give food to the people. You have to respond to their dreams. We all have dreams, and particularly, the most vulnerable of us have their own dreams, and they expect their leaders to deliver on those dreams.
MS. HARDIN: Lesley.
QUESTION: The question is regarding the debt relief for countries that have already gone; not the ones that are ring-fenced. Have you seen any particular interest or increase in private investment in those countries, kind of, you know, investors rushing in offering credits and so on to these governments? Also, obviously, you know, governments are now planning their budgets around that debt relief. Are you seeing any sort of real focus of where that money that they are saving, where that is going to?
MS. CHRISTENSEN: First, on the issue of private investment, we have seen some increase in private investment to African countries, but the bulk of it still goes into the natural resources. Obviously, the figures are very weak in oil countries, but at least to the extent we have the information, I mean, we have seen some increase in some countries.
Now, the relationship between private investment and debt relief, we have seen some increases in private in-flows but not always direct investment; also in portfolio investments in a number of countries: Zambia, Nigeria, other countries very recently.
And it's a mixture; it can be perhaps in response to debt relief. Also, it is in response to the commodity prices and sort of the general healthy outlook of the economy. So improved outlook; so I think it's difficult to distinguish the effect of debt relief versus sort of the general situation. Obviously, debt relief is one factor that is important.
Now, your final question was how to attract debt relief?
QUESTION: What do governments do with that money that they're saving from the debt relief? Is it clear yet?
MS. CHRISTENSEN: First, we have experience with the HIPC debt relief, and now, we have MDI debt relief. Under HIPC debt relief, we have tracked closely what has happened in the various recipient countries, and for instance, we have seen increases in poverty-reducing expenditures in the budget, and there are reports on that for each of the countries.
We are doing something similar with MDI debt relief, and I mean, it's still early days. As you know, it's just started a few months ago. But certainly, we are encouraging each of the countries to be very transparent with the savings, so to speak, and also sort of disseminated more broadly what is happening to the funds. And we are discussing that as part of our regular discussions with the authorities.
MS. HARDIN: We can take one more question, please, right here in the front row.
QUESTION: [Inaudible] again with the African Sun Times again.
We have been told that a quarter of the donor aid goes to pay for the experts. Could you please tell me if the African experts working at the Fund and the World Bank have the same salary or treatment as their colleagues from the Western countries. And Mr. Bio Tchané, could you tell me if your salaries equal those of your colleagues from other departments?
MR. BIO-TCHANÉ: I would rather leave the response to Michael Nowak, who is in charge of personnel. He knows my salary, so he—
MR. Nowak: I wouldn't for a moment dream of divulging your salary in a press conference.
MR. Nowak: So I'm going to skip that particular question.
In terms of the differential pay, I mean, we pay essentially for technical assistance in terms of the quality of the service provided. It doesn't matter where someone comes from. Our main concern is that the technical assistance that is given to particular countries is of the highest quality, and we are willing to pay what it takes to get that high quality, irrespective of where the person comes from.
MS. HARDIN: Okay.
MR. TIWARI: And second part, which he didn't say, which is that in the Fund, salaries are linked to jobs. They are independent of origin, ethnicity, and gender.
MS. HARDIN: Okay, thank you.
MR. BIO-TCHANÉ: And finally, let me say that you know we have two TA centers in Africa, one in Bamako and one in Dar es Salaam. We have just decided to open a third one in Libreville. And part of the policies of those centers is to recruit more local experts. So if you discuss with the TA center in Bamako, you will learn that most of the short-term experts we are using are coming from the region, and even the long-term experts are in that center are coming from the region, from Africa.
MS. HARDIN: Okay; thank you all for coming. If any of you are interested in one-on-one interviews, please see me later in the press room or immediately following the press conference. Thank you again for coming.