IMF offers three-pillared prescription for African growth
Countries in sub-Saharan Africa need to get their budgets in order, diversify their economies and look after their poorest people. If they do that, there is no reason why the region cannot have the strong growth needed to meet the aspirations of a young and growing population.
That, at least, is the three-pillared prescription from the International Monetary Fund as expressed by one of its top Africa researchers, Celine Allard, in an official IMF blog post and podcast.
Allard co-authored the Fund’s regional economic outlook, released earlier this month. It found that sub-Saharan economic growth hit only 1.4 percent last year, the lowest level in two decades and well off the 5-6 percent rates normally reached. It was also well below the population growth rate.
“This is a quite broad-based deceleration because we see about two-thirds of the countries having slowed down last year, which is quite substantial,” she said in the podcast.
While some of the reasons for the slowdown are beyond the region’s immediate control — low global commodity prices, drought etc — Allard said some problems are down to a lack of governmental response. “Part of the deteriorated outlook is a reflection of limited policy adjustment in the region,” she said.
Hence, the first pillar: renewed focus on debt reduction, fiscal policy to raise domestic revenues, and greater exchange rate flexibility.
Allard noted that some of the countries in the region that had kept growth up, such as Senegal and Ivory Coast, had run up large budget deficits to help this along.
With that, though, comes vulnerability, she said, and now is the time to shift gradually to reduce this.
As well as taking action on budgets, the IMF said sub-Sahara needs to focus on economic diversification and improving the business climate so that the private sector can feel confident about investing.
Many countries in the region are overly dependent on commodities — getting a huge boost when they are in demand but suffering when prices fall.
A Bank for International Settlements paper last year estimated that the share of commodities in of sub-Sahara African exports rose to 76 percent in 2010–14 from 57 percent in 1990–99.
Allard said the third pillar was to provide social safety nets to protect the most vulnerable in society.
“We know that in some countries there are some programmes, but they are usually fragmented and they need to be better targeted,” she said.