IMF chief hails sub-Saharan Africa’s ‘homegrown resilience’
Sub-Saharan Africa is on the path of economic progress, but it must address longer-term challenges to its future, including structural transformation, more inclusive growth, and conflict, IMF Managing Director Christine Lagarde said.
During a January 4–8 trip to Malawi and Cote d’Ivoire, Lagarde emphasized the continent’s huge potential, but also warned about potential obstacles.
“I cannot help but be impressed by the continent’s resilience … in the face of the most serious disturbances seen by the world’s economy since the Great Depression.” she said in Abidjan, Cote d’Ivoire. Noting that the IMF now expects African economic growth of around 5¼ percent in 2013, Lagarde said “The winds blow differently. Change is coming. Over the past decade, Africa has been the world’s second-fastest growing region, after emerging Asia.”
During her tour the IMF chief met with government officials, including President Joyce Banda of Malawi and President Alassane Ouattara of Cote d’Ivoire, and with business leaders, parliamentarians, civil society representatives, womens groups, and students.
In Lilongwe, Malawi, Lagarde hailed the government’s economic reform program. “Malawi is half across the river, and the other bank is within reach,” she said. In Cote d’Ivoire, she commended President Ouattara for his efforts to restructure the economy. She called for a second Ivoirien economic miracle in a speech at the National Assembly, before an extraordinary session of the body, chaired by Speaker of the House Guillaume Soro. The hour-long speech was broadcast live on national television and radio.
Speaking in Lilongwe, Lagarde said that Africa’s resilience was homegrown. African countries were able to take advantage of the strong foundations they had built in the years leading up to the global crisis. She also noted that reorientation of trade and investment toward a more diverse set of partners. Today, nontraditional partners account for 50 percent of African imports and 60 percent of exports. China is now the region’s largest single trading partner, she noted.
At the same time, Lagarde emphasized the risks facing the region. “As long as the global turmoil persists, people on this continent remain at risk. The links are simply too strong—from trade, foreign investment, remittances, and aid.” She cited IMF research showing that a sustained global slowdown of 2 percentage points of GDP would reduce growth in sub-Saharan Africa by about 1¼ percentage points a year. She also mentioned the threat from food prices and food scarcity.
Looking forward, Lagarde said in Abidjan that the four main challenges for Africa are: faster structural transformation; more inclusive growth and job creation; better management of natural resources; and stronger financial sectors. “Inclusion has many dimensions. It certainly encompasses the investment in people and jobs…It also encompasses robust social spending, especially to reduce the hardships faced by Côte d’Ivoire’s most destitute citizens.”
But she warned against general subsidies that are designed to protect consumers, especially in the energy sector, but end up protecting those who do not need them. “These kinds of subsidies are bad for the budget, bad for economic efficiency, bad for equity and inclusion, and bad for the environment,” said Lagarde.
Lagarde also recognized the challenges posed by reforms in countries such as Malawi, where the authorities’ economic program includes the liberalization of the foreign exchange market and a 50 percent devaluation of the currency. During her meeting with President Banda, she stressed the “need to stay the course, while putting in place social protection programs to alleviate the impact of adjustment measures on the poorest households.”
President Banda said there would be no backtracking on reforms. “This is why I have been able to take difficult decisions that could have destroyed my political career: because I know if we did not take this route the country could not be on the recovery path,” said Banda.
In Lilongwe as well as in Abidjan, Lagarde said “the IMF is a friend…who tells the truth.” She stressed that the IMF will be on the side of its African members, noting that the institution has stepped up its technical assistance to the region.
The IMF now has four regional technical assistance centers, and a fifth is due to open in Ghana later this year. During her visit to Cote d’Ivoire, Lagarde inaugurated the center for West Africa in its new offices in Abidjan. The center will serve ten regional countries. A week earlier Lagarde exchanged financing documents with the Mauritius authorities for the establishment of the IMF’s new Africa Training Institute.
In addition, the IMF Executive Board decided in December 2012 to keep at zero interest rates all concessional lending for two more years.
Speaking in Abidjan, Lagarde also drew attention to the challenge of conflicts in sub-Saharan Africa. “Security is also too fragile in too many countries, especially here in West Africa. Without the promise of peace, people will not have the courage to invest in their own futures,” She said.
Lagarde told the Ivoirien National Assembly that conflict wreaks widespread economic havoc—not only in the country in question, but across neighboring countries too. “It is the true enemy of development,” she stated.