Sub-Saharan Africa: Outlook and Challenges

Speakers:

Abdoulaye Bio-Tchané, IMF African Department, director
Kathleen White, IMF External Relations Department
Patricia Alonso-Gomo, IMF Policy Development and Review (PDR), head of PRGF
Roger Nord, IMF African Department, assistant director
Dhanesh Ghura, IMF African Department, regional chief oil producing nations

Discussion

The session gave an update on the work and the priorities of the IMF in Africa. Bio-Tchané confirmed that CSOs have a role to play in the IMF’s work in the continent. He then highlighted some of the findings of the Regional Economic Outlook for Sub-Saharan Africa such as the positive growth performance including in non-oil exports. But he highlighted that donors have not met their commitments on a scaling-up of aid and that the MDGs would probably not be met. He cited Mozambique as a good example where rural poverty is declining and where there is political and economic leadership. He cautioned against spending booms from windfall commodity export revenue and stated that borrowing must be within sustainable limits. Then the floor was opened up to comments and questions.

On the IMF’s role in LICS (ABT):

• The IMF was committed to the medium-term strategy including partnerships with low-income countries, meeting the MDGs, providing technical assistance and providing debt relief.
• There is clear demand for a non-financing instrument like the PSI, as many countries are opting for this
• Other priority areas included trade, financial sectors and public financial management – all of which are growth critical
• The IMF is also planning to improve its work in fragile states
• Bio-Tchané stated that the donors must do more on meeting their aid pledges and harmonising their aid

On the IEO report (PAG):

• Patricia feels that the IMF does a lot of the things the IMF recommends but they don’t explain themselves as much as they should
• Admits that the IMF could do better and that they need to be more proactive in getting PSIA
• Feels that the report doesn’t recognize that the IMF does do poverty assessment but sometimes not in terms of a formal PSIA

Abdoulaye Bio-Tchané:

• Admits the IMF is bad at communication
• Also said the IMF needs to do more on things like donor coordination
• Defends the IMFs record on PSIA, highlighting the creation of the PSIA unit, and the PSIAs done in Gabon and Ghana
• Argues that many times PSIA can be applied to other countries without a full new PSIA – ie. for the effect of removing fuel price subsidies elsewhere, the IMF can look at the Ghana PSIA without doing a whole new one

Roger Nord:

• The role of the authorities is key on PSIA, they are the important ones because they make the decisions
• He felt the IMF could do more studies for the authorities, to demonstrate to them the tradeoffs

Patricia:

• Example of Mauritania, where there were bad health indicators despite similar levels of health spending to neighbours. The IMF doesn’t need PSIA to work on this or analyse this problem

On the Zambia tax policy question (as an example of poor poverty assessment) (ABT):

• This was a technical assistance mission in Zambia, not a negotiation or PRGF review
• It was a study on tax collection, not in the context of a programme discussion

D Ghuria:

• The Fund’s work is in the macroeconomic environment, its role is to decrease inflation because this is growth critical
• The Fund is wirking with the World Bank to make growth more broad based
• PFM is very important as well as financial sectors and credit availability

Hakan from the Turkish Confederation of Businessmen asked about the role of investment in Africa and trade promotion. Response:

• Africa is improving its investment climate and business environment, IMF encourages more investment in Africa.

Sasja Bokkerink from Oxfam Novib asked about the end of wage bill ceilings and an IMF paper that argues against aid earmarks. The response (ABT):

• For scaling up of aid, Africa needs more general budget support (GBS) and less earmarks on aid
• GBS will help improve PFM, the improvement of internal process in African countries is important
• Citizens are interested in where their money is being spent
• The IMF is sceptical of scaling-up to happen through project aid or lending
• IMF supports Paris declaration

On wage bill ceilings (RN):

• Fewer wage bill ceilings being used because of conditionality streamlining
• Budget deficit targets are more appropriate
• Conditionality is helpful for the authorities, it helps them monitor their budget and programmes
• Patricia added that the goal/objective is fiscal conditions, not wages, so the IMF recognises that ceilings are not the best way forward

Joe W. from World Vision International asked about rural poverty and asked what the IMF will do about it. ABT response:

• Country authorities have to make it their priority
• PRSP is done to set country priorities and CSOs should feed into that process

Migel Slosh of Chile asked about aid dependency and Dutch disease and worried about the crowding out of private investment. He said the Chilean experience was that aid was not necessary and asked if aid was sustainable. ABT response:

• There is no definite academic conclusion on aid dependence and there are cases on both sides to prove the point. Aid can help.
• RN adds that aid is already there, so the real question is how to make best use of it

Laurentia from the Pan-African Forum on Sustainable Development in Ghana asked about agricultural investment, highlighting that African countries have not met their 10% investment targets. IMF response (DG):

• The IMF money is generally for balance of payments problems, it should not be used for investment in agriculture.
• Don’t underestimate the role that microfinance has to play in agricultural investment

Elena Gerebizza from CRBM queried about the problems with the PRGF and the PRSP not reflecting people’s needs and people’s participation.

Then Oumar Makalou from Mali (and ex-IMF African department staff) responded that he felt the PRSP was adequate but too complex for civil society to understand. He argued that microfinancing was a good way forward.