- I. Patel
- Published Date:
- December 1992
Papers presented at a symposium held in Gaborone, Botswana, February 25–27, 1991
INTERNATIONAL MONETARY FUND
Washington ⋅ 1992
@ 1992 International Monetary Fund
Cover and interior design by IMF Graphics Section
Joint Bank-Fund Library Cataloging-in-Publication Data
Policies for African development : from the 1980s to the 1990s / editor, I. G. Patel.—Washington International Monetary Bund, 1992.
p. : cm.
“Papers presented at a symposium held in Gaborone. Botswana. February 25–27, 1991.”
Includes bibliographical references.
1. Africa—Economic policy—Congresses. 2. Africa—Economic conditions—I960—Congresses. 5 Finance—Africa—Congresses. 1. Patel, I. G. (Indraprasad Gordhanbhai), 1924–II. International Monetary Fund.
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Africa, despite great economic adversity during the past twenty years, has managed recently to record positive real growth, steadily transform and improve its economic structures and systems, and improve the living standards of the rural population. This has been achieved through the perseverence of nearly thirty African countries in following growth-oriented adjustment programs, with the support of the International Monetary Fund (IMF).
A seminar held in Gaborone, Botswana, from February 25–27, 1991, sponsored by the Association of African Central Banks and the IMF, provided an opportunity for frank evaluation and discussion of the progress made by Africa during the 1980s and of the prospects and needs for continued development in the 1990s. The propositions that regional cooperation in Africa has formidable potential in enhancing economic efficiency and that the industrial countries have a special responsibility in helping Africa drew broad agreement. In view of the importance of the issues discussed, it has been decided to publish the proceedings of the seminar so as to make them available to a wider audience.
There is no doubt that for Africa the road ahead is hard, but it is my deep conviction that many African countries during the 1990s will be able to successfully launch homegrown programs, deserving strong international support and leading to increased regional cooperation. The responsibility for development and economic adjustment is a shared one. The IMF is ready to do its part in helping Africa face the challenges that lie ahead.
- M. Camdessus
- Managing Director
- International Monetary Fund
I should like to say what a great pleasure and privilege it has been to participate in this symposium and what a rich and rewarding experience it was. I am grateful to the Association of African Central Banks and to the IMF for providing me with this unique experience. The staff of the Central Bank of Botswana and Governor Hermans spared no effort in making our stay comfortable and our discussions fruitful; and special thanks are due to Mrs. Hermans for keeping our spouses safely and happily away from the conference hall.
I am grateful also to all the participants for the rich fare they served. I have done scant justice to the actual discussion at the symposium in this introduction. Unlike the invited authors whose papers are reproduced here, those who spoke on the spur of the moment, and thus rose splendidly to the occasion so to speak, have to be content with what I can recollect and record in a short introduction in which I have not been able to resist the temptation of inserting my own overtones.
Perhaps it is not too much to hope that it is interactions such as those that have taken place at the symposium—free from rancor, clearheaded, hard-hitting, and yet not allergic to delineation of agreement as well as disagreement—that give grounds for hope that the transition from the 1980s to the 1990s in Africa may well be a journey from stagnation and decline to revitalization and renewed vigor.
I am greatly indebted to the IMF staff, Ahmed Abushadi, who ably coordinated the seminar, and Juanita Roushdy, who edited and prepared the volume for publication, and to Varghese Thomas and his associates of the Indian Petrochemicals Corporation Limited, Baroda, for voluntary assistance so readily given at every stage.
- I. G. Patel
- Editor and Moderator
- i. g. patel
- Opening Remarks
- I Structural Adjustment in Africa: Future Approaches and Lessons Learned from the Past
- II Africa’s Adjustment and the External Debt Problem: Issues and Options
- A View from the African Development Bank
- a. sancowawa
- A View from the Paris Club
- denis samuel-lajeunesse
- An Unofficial View
- g. k. helleiner
- Africa’s Adjustment and the External Debt Problem
- percy s. mistry
- Issues and Options
- jack boorman and ajai chopra
- Official Debt Reduction: Toronto Terms, Trinidad Terms, and Netherlands Initiative
- Francesco abbate and anh-nga tran-nguyen
- Africa’s Adjustment and the External Debt Problem
- A View from the African Development Bank
- III Financing Growth and Development in Africa: Outlook and Issues
- Estimating the Cost of Financing African Development in the 1990s
- maria cristina germany, charles p. humphreys, and stephen o’brien
- A View from the UN Commission for Africa
- owodunni teriba
- Resource Gaps and Financing for Growth in Africa
- benno j. ndulu
- Resource Gaps and Financing for Growth in Africa
- Just How Important Is Finance for African Development
- tony killick
- Structural Adjustment Program: Lesotho’s Experience in a Nutshell
- a.m. maruping
- Estimating the Cost of Financing African Development in the 1990s
- IV Trade, Investment, and Growth: Prospects for Africa
- Panel Discussion Adjustment, Resources, and Growth: How to Manage in the 1990s
- List of Participants
The joint symposium of the Association of African Central Banks and the International Monetary Fund (IMF), held in Gaborone, Botswana, February 25—27, 1991, was a sequel to a similar gathering held in Nairobi, Kenya, May 13—15, 1985. The contrast in the mood on the two occasions was remarkable. The 1985 symposium had a hint of confrontation, or, put another way, illustrated a need for much greater understanding, between the IMF and Africa. The 1991 symposium had a marked positive and constructive tone, and the views expressed had a remarkable degree of correspondence. Emphasis was on the dynamics of a suitable policy framework for the 1990s rather than on dialectics, which had been the emphasis of the 1980s. There was a strong undercurrent that the primary emphasis should be on African development, which had sadly received such a serious setback in the 1980s.
The African central bankers in Gaborone were noticeably free from any tendency to minimize the magnitude of their task or to explain away the mistakes of the past. While emphasizing the importance of the external environment and of the policies of the rich, they were unsparing in highlighting the far-reaching responsibilities that Africans alone can shoulder. The representatives of the IMF, the World Bank, the Paris Club, and the Western intelligentsia present were also remarkably free from dogma. Quite clearly, neither the earlier debates nor the experience of recent years had gone unheeded. As Governor Yansane of Guinea so aptly put it, one important consequence of the experience of structural adjustment is that it has brought about some adjustment of minds as well.
One should perhaps be somewhat wary about the signs of an emerging consensus at the conference. Consensus can be a kind of tranquilizer that dulls our perception about vital differences and nuances. These can get lost in catchphrases that easily roll off our tongues. One has also regretfully to admit that while more powerful now than before, central bankers do not always reflect correctly the public mood nor the perceptions and compulsions of political leaders. Some might even suggest that those present at the conference—the Managing Director of the IMF not excluded—could well be a little ahead of their respective constituencies! The evidence so far as to the right recipe for countries that differ in circumstance as much as they resemble each other in terms of policy responses generally is such as to warn against any simplistic view about a policy framework for the development of Africa as a whole. All these caveats notwithstanding—and they were made during the discussion—it has to be reckoned as a hopeful sign that there is now considerable common ground on which our analysis and aspirations rest.
The tone for the entire conference was set admirably by the two “keynote” speeches given by Governor Turay, Chairman of the Association of African Central Banks, and Mr. Camdessus, Managing Director of the IMF. Governor Turay, while emphasizing the limited successes so far in structural adjustment and the almost total absence of growth and of progress toward diversification, which alone can make African economies fully responsive to policy stimuli, recognized that far-reaching changes were inevitable. His emphasis on technical assistance from the IMF and elsewhere to enable Africans to draw their own blueprint for adjustment and growth was echoed during the conference in different contexts.
Mr. Camdessus was emphatic that what was needed was growth-oriented structural adjustment and that antipoverty policies and programs were not just additives or correctives but should be an integral part of structural adjustment. He could well have added that this would be easier if antipoverty concerns were already an integral part of longer-term development plans or programs. Mr. Camdessus was equally clear that African development was a shared responsibility and that international institutions had to prod the richer countries to do their part just as they had to insist on appropriate policies by the developing world. Above all, one has to recognize that there is room for improvement and for learning from experience so that an appropriate policy framework for any country—let alone a continent—is not a closed book, even if there are some basic economic laws that none can evade. Difficult as the task is and, indeed, because it is so difficult, there is no escape from perseverance for all concerned in the partnership. While emphasizing this, Mr. Camdessus was hopeful of a more positive response all round.
The first session of the symposium was devoted to an assessment of structural adjustment. The term “structural adjustment” no longer refers only to a stable macroeconomic framework with excess demand and inflation under control and major distortions in key prices, such as the exchange rate or interest rates or prices of wage-goods and labor, removed. There is now general agreement that it should embrace an appropriate set of microeconomic policies as well. They should include less reliance on government control and public ownership and more on individual initiative and signals from the markets, incentives by way of moderate tax rates, a less discriminatory and more transparent set of rules and regulations to the extent required, greater integration into the world economy, and, above all, the creation and maintenance of a competitive environment conducive to greater efficiency and resilience.
But the Gaborone conference was also clear that, structural adjustment even so widely defined, greatly abridges the policy agenda. Economic growth or development requires going beyond this to positive steps to stimulate savings and investment, to develop human resources, as well as control population growth, and to prevent the degradation and destruction of natural resources—to mention just the important things. Participation of the people and concern for the poor are not luxuries but essential ingredients for the success and sustainability of any sensible set of policies. Structural adjustment, development, social justice, and environmental protection have all to proceed side by side; and in the real world, countries have also to reckon with uncertainty and shocks whether external (oil prices) or internal (crop failures). Adjustment to unforeseeable shocks and factors is as much a part of the policy agenda as are sustainable growth, or social justice, or financial stability and a competitive environment.
It is this diversity and depth of the policy agenda that makes for complexity and difficult judgments. While all important objectives have to be pursued and means wielded, it is not possible to do everything at the same time. Priorities have to be set, and policies and programs have to be phased appropriately—a point made most forcefully by Mr. Boorman of the IMF. There are some sequences that one can confidently recommend. For example, it would be suicidal to liberalize imports extensively unless a substantial degree of macroeconomic adjustment had already taken place, excess demand had been greatly reduced, and realistic exchange rates and interest rates were in place.
But everything is not so clear or obvious. There is a temptation to think—perhaps more so among donors and international financial institutions—that as long as structural adjustment in the wider sense is not completed, investment for development must be postponed or greatly reduced. But, as Mr. Helleiner rightly points out, without some evidence of continued growth, it may well be impossible to muster enough political support for structural adjustment. In any event, the agenda for structural adjustment, at least in the microeconomic sense, is so vast and far-reaching that there cannot be agreement on all elements of it. Nor can it be implemented except over a number of years. A stop-and-go policy on growth can be self-defeating. And yet, in practice, developmental ambitions may have to be curtailed, even when there are no major distortions to begin with, for example, in response to a severe shock. How to minimize the adverse consequences of unavoidable and indeed generally beneficial adjustment is not an easy question, particularly when growth as well as social justice are borne in mind. We may all agree that public expenditure needs to be reduced. But how to do this without harming development or the consumption of the poor is not that easy to prescribe.
Not only is it that our knowledge of economic facts and relationships is imperfect or that our experience so far gives no clear answers to such detailed questions of priorities and phasing in a particular environment, but also by their very nature most economic policies are double-edged; even good policies have bad side effects. At any given time, the art of making economic policy is the art of choosing the second or even the third best—of trading off and recognizing realities even as we seek to change them. For example, if tax incentives are necessary for private enterprise and risk taking, cannot subsidies also be so justified at least in some contexts? One may agree with Mr. Boorman that, even so, subsidies must be minimized and made transparent and even add that they must be pinpointed as far as possible. But there is no room for either/or here.
Major prices, like exchange rates, interest rates, wages, and prices of key wage-goods, have not only to be realistic but also stable so as to provide a stable framework for private decisions. Stability in these areas cannot be guaranteed by government fiat. It requires sound fiscal and monetary policies. But few governments in actual practice refrain from stabilizing action in such vital areas and rely exclusively on the free play of markets. Or to take a more relevant case for most of Africa, as the Governor of the Bank of Swaziland, Mr. Oliver, pointed out, customs revenue is such an important part of government receipts that one cannot sacrifice it unduly in a hurry to open the economy to external competition and thus jeopardize financial stability.
The much greater agreement on fundamentals should not obscure the fact that we do not know enough and cannot, in any case, be dogmatic about the details of any program that has to take many specific things and trade-offs into account. When one is concerned with the nitty-gritty of actual programs, there must be room for argument, debate, discussion, further research, and revisions and reformulations and a certain degree of humility and give-and-take on the part of all concerned.
It is good that the debate has shifted from first principles to concrete programs and that there is no great inclination nowadays to look for alternative strategies or approaches—although the terminology of the past may still linger on in some quarters, as is evidenced by some of the papers published here. No, we do not have a major alternative to follow, be it socialist or statist, autarchic, or even ascetic. Austerity, discriminatory protection, state guidance in investment, and an active role in many spheres, as well as concern for social justice, remain valid. Words like “socialism” and “a mixed economy” or “autarchy,” in the sense of “self reliance,” and “retreat from consumerism” will not disappear altogether from the dictionary of development. But the concerns underlying these words can only supplement the policy agenda; they do not provide a substitute for the logic and discipline inherent in structural adjustments.
The main point is that policies for African development must be homegrown, and there should be room for argument and open-mindedness when individual country programs are under consideration. The debate must be conducted not on first principles but on a case-by-case basis. But for that, the developing countries, and Africa in particular, have to be better equipped. There is need for improvement of statistics and analytical skills and for better awareness of experience elsewhere and of changes in technology and the external environment in general. Negotiating skills are also scarce and strained unbearably by the demands of a multiplicity of donors and institutions to which Mr. Martin’s paper draws pointed attention. There needs to be better coordination among donors and a readiness to give the benefit of doubt to those who have to implement the program—something very difficult for donors and even international institutions to accept. The developing countries have come a long way in giving the benefit of doubt to the essential features of structural adjustment. It is only reasonable that on details of priorities, or phasing, or speed and trade-offs, or appropriate mix at a particular stage, the benefit of doubt be given to those who are nearer the ground.
It is in this context that Africa’s need for technical assistance deserves the greatest emphasis. Programs for structural adjustment and development must not be only seen as homegrown; they must actually be so. This requires that many more Africans be trained—in the highest academic standards in economics; this can only be done by greater access to the finest universities in the world. It is regrettable that, except perhaps in the United States and France, in large parts of the Western world the welcome extended to students from the Third World is waning. This has to be remedied—if need be by private foundations and international institutions. Without that, creative and constructive dialogue on equal footing between Africa and the IMF or the World Bank or the donor community will remain an ever-receding dream.
All this has relevance also to the vexing question of conditionalities. The instinctive reaction against any kind of conditionality is much less in evidence now—although one should never expect it to disappear altogether. But areas for genuine worry remain. I have already referred to the complexity of any agenda for reform and revitalization and for the consequent need for the benefit of doubt being given not to the stronger party in negotiations but to the party that ultimately takes the blame and is, therefore, truly accountable. The rich are rich enough to afford this additional risk, which can have a high payoff.
More important perhaps, when there is so much uncertainty and so many variables, is whether there is any justification for the kind of sudden-death conditionality involved in the credit ceilings prescribed by the IMF. Even a modest breach of these ceilings leads automatically to a withdrawal of promised assistance. It does not help to argue that IMF conditionality is related to instruments rather than to objectives. Whether that is valid or not is not the point; the point is whether it is better to continue with assistance while resuming negotiations whenever a condition is not observed or to hold the gun and then argue. Bad cases of noncompliance can occur, despite clear warnings; in such cases, stoppage of further aid would be justified. But a breach of a credit ceiling does not somehow seem to command that much pre-eminence in the overall context of a wide-ranging reform of policies. It seems like a vestige from the past and deserves another look.
On the other hand, the temptation to multiply the area of conditionality or policy undertakings with precise time frames (even if there are no specific sudden-death criteria)—to which the World Bank seems to be prone—is equally at odds with what can be realistically expected. For example, the World Bank’s structural adjustment program for Zaïre included 102 measures to be introduced in 24 months; this evoked more than a little laughter from the conferees. Yes, there is some merit in preparing a detailed and comprehensive shopping list, but if some items are not actually bought, we cannot allow that to become a source of family discord.
At the heart of any argument about performance is the reasonableness of the time frame during which certain measures are to be taken or certain results achieved. Apart from questions of judgment and the intervention of the unexpected, the issue of a reasonable time frame is further complicated by the fact that African development is recognized as a partnership where the partners have unequal strength and very different responsibilities. If the need for internal policy changes and if the need for external support or finance are recognized, what is an appropriate or optimum mix of the two? It is true that programs can fail because of lack of political will or strength at home, but they can also—and do—fail because they are underfunded. It will not do to assert—as international institutions are sometimes tempted to do—that the availability of external resources has to be taken as given and the programs adjusted to that. A country does not have an unlimited ability to adjust on a wide front within a short time, and underfunded programs can be worse than none, as they squander away scarce resources of political will and generate cynicism and despondency all round.
To put it in reverse, forcing undue speed on poor countries guarantees that programs will fail or will impose unacceptable hardship on the vulnerable sections of society and may even retard growth. It is now more generally accepted that international institutions should not be guided too much by what might appear to be financially feasible. They have to strive to stretch these limits when sensible programs are available; and there is some evidence that this is beginning to happen, at least in the African context. Whether this will continue when more and more countries are ready to implement realistic programs remains to be seen. In the meantime, programs may even have to be front-loaded in terms of external support if, as Mr. Mullei points out, there are to be tangible early results to steady the political and public will for more difficult steps.
True, lapses, willful or otherwise, could occur on the part of the developing countries. But policy infirmities are not the prerogative of the poor only, and strident didacticism seldom behooves the rich, who have less excuse in terms of the suffering of their people for their own aberrations. If the message, as Mr. Camdessus pointed out, is perseverance, we have to persevere with the successful and the not-so-successful, with the political heavyweights, as well as the lightweights. Donors, as well as recipients, have to be urged to stay the course and not cut and run at the first sight of failure.
Needless to say, resources will always be limited, and difficult questions about the distribution of available funds among all recipients will remain to be solved. Should support be concentrated on those who are making the sharpest of breaks with the past? Is there not moral hazard in this? Should concentration be on those who are already reasonably successful rather than on those who are just coming along? There was a feeling that the most successful examples of Structural adjustment were precisely those that received much larger support in relation to their size. However attractive rewarding success and punishing reluctance may be, one has to be careful—if staying the course is the message (and it should be). There are many examples of the good having turned bad and of the bad eventually returning to the fold. Bridges, therefore, have to be maintained everywhere and the sinners and the weak of will should not be abandoned altogether. At the other end, there was a feeling among African central bankers themselves that those who pay their debts should not be penalized because others do not or cannot and that even middle-income African countries have a claim on external support, as they too have large areas of poverty and under-development. These are difficult questions that cannot be resolved fully.
Even more difficult are the truly hopeless cases for the foreseeable future—whether as a result of internal discord and strife, folly, tyranny, or some quirk of rapidly deteriorating natural resources and high rates of population growth. It would be idle to pretend that there are no such cases. To paraphrase Isaac Bashevis Singer, it is nowhere written that progress must be possible everywhere at all times. But even these unfortunate cases cannot be abandoned altogether even if aid to them can only be temporizing and for survival more than for growth.
Conferees recognized that what is expected from the richer countries is not just finance or even assistance, including technical assistance, or a less protectionist trade policy, but consideration by them of the effect of their domestic policies on the developing world and particularly on Africa, where external influences had a tendency to reverberate more vigorously. Stop-and-go policies in developed countries or recessionary trends can cripple African trade volumes, as well as terms of trade. Lack of macroeconomic adjustment in major industrial countries tends to divert too much of the world’s savings to some of the rich countries and to increase interest rates to levels that make a great deal of investment unremunerative in the poorer countries. Financial institutions like the IMF have a surveillance role in the industrial countries as well, and the IMF could do more to urge, for example, higher rates of saving everywhere. The tendency sometimes to solve the problems of those who save too little by asking others to consume more can be a disaster not just for the developing world.
One of the most heartwarming aspects of this symposium has been the emphasis on regional cooperation transcending mere sound policies in individual countries. Mr. Camdessus highlighted the importance of such cooperation while emphasizing that it should be outward looking and that it can be more successful when there is greater harmonization of domestic policies as well. These sentiments were echoed widely; and despite the poor record of such cooperation in the past, it was felt that recent experience was more promising. The experience of the Southern African Development Coordination Conference (SADCC), of which all countries in Southern Africa with the major exception of South Africa were members, was often quoted approvingly; and the hope was expressed that once South Africa returned to more civilized norms, the scope for mutual cooperation would increase greatly in a region that had the highest potential for growth in Africa it not in the developing world as a whole.
In sum, the discussion on structural adjustment became truly a discussion on the whole range of policies relevant, both internal and external, to Africa.
The subject of the second session, Africa’s adjustment and the external debt problem, proved in some ways to be the most rewarding, as it dealt with a number of specific issues and options. That debt relief cannot be a substitute for more traditional aid was recognized and that it should indeed be an integral part of the total aid package. Africa’s debt problem may appear small in relation to that of Latin America, for example, but it should not receive less attention for that reason. It is much more difficult for Africa to service debt because of the rigidities inherent in highly undiversified economic structures; and dollar for dollar, the suffering involved in debt repayment in Africa is much greater. Africa’s debt problems, thus, deserve greater attention; and they are indeed receiving it in recent years, although much more remains to be done.
Debt relief, as a mechanism for transferring real resources, clearly enjoys several distinct advantages. It can translate almost immediately into higher imports without any question about absorptive capacity; and one thing that is beyond question is that African development has been held back by lack of import capacity—a consideration that will remain valid for the 1990s as well. What is more, debt relief permits imports that are most in need as it is akin to availability of free foreign exchange through exports, which aid more often is not. If, as Mr. Ndulu points out, there is considerable scope for increasing the productivity of capital in Africa by greater use of capacity already created, debt relief can certainly be most beneficial, as it would permit the import of raw materials and components, as well as spares and miscellaneous capital goods.
Progress toward debt relief in Africa has been significant in respect of official bilateral debt, and as Mr. Lajeunesse of the Paris Club points out, radical steps forward are actively under consideration. One can only hope that agreement will soon be reached on Prime Minister Major’s proposal even if one cannot go as far as Mr. Pronck of the Netherlands.
The Paris Club insists on a prior agreement with the IMF before debt relief is extended, which is understandable, but excessive linkages may at times be counterproductive. There must be sufficient flexibility to act in time. The willingness to consider the debt problems of the middle-income countries is welcome. Should the formula for debt relief have too many options for donors, resulting perhaps in the lowest common denominator to prevail, or should the Paris Club insist on greater uniformity? These are matters of judgment that might vary from time to time. But the reluctance to deal with the entire stock of debt at one go is less understandable, as members of the Paris Club have enough hold over all debtors anyway—including those who may be freed for a number of years from the annual pilgrimage to Paris. Given the transaction cost of negotiation for the African countries, more radical solutions may have other side benefits in that they will release managerial resources better utilized for implementation of policies than for negotiation of debt relief.
Progress in securing relief for commercial debt has been particularly tardy in the case of Africa and more attention needs to be paid to this despite the fact that the share of private commercial debt in total is rather small for Africa. This is also true of commercial or official debt owed to countries in Eastern Europe and elsewhere, which are not members of the Paris Club.
As for official financial institutions, where there is a perverse negative flow of resources at present in most cases, there has to be a departure from the traditional policy of no rescheduling even when this is done indirectly. The reservation of $100 million from the World Bank’s profits for reducing the debt burden of the neediest African countries is welcome; and the Bank could and should do more in future. As for the IMF, it has made a beginning with the “rights” approach to tackle the problem of countries most seriously in arrears. But this is hardly an adequate answer. The African Development Bank, it was noted, has taken no initiative in this field.
Mr. Mistry draws pointed attention to the rather insignificant results achieved so far and asks why some of the radical measures suggested for securing greater and more concessional resources for debt relief should not be pursued. Perhaps Mr. Boorman is right when he suggests that gold sales or a special issue of drawing rights are not practical politics at present. But this should not be true at least of a concerted move to lower IMF charges, which were raised substantially in the recent past. The IMF is an instrument of international cooperation, and there is no intrinsic reason why creditor positions in the IMF should earn market rates of return. This was not so until the early 1980s when something akin to fundamentalism of the “right” had a brief sway. There are already signs of at least partial retreat in the light of experience from the mood of the early 1980s. There is also the market-related consideration that a reserve asset virtually fully guaranteed against depreciation and default should be content with a lower rate of return. A sizable reduction in IMF charges should be high on the agenda of policy reform in the IMF itself, and it is to be hoped that the Managing Director will throw the full weight of his authority behind this proposal. Beyond this, perhaps the atmosphere in the era after the Gulf war may be conducive to a more statesman-like attitude to the needs of developing countries; and this could be harnessed to secure greater and more concessional resources under existing arrangements like those of the International Development Association (IDA) and bilateral aid without opening any new channels.
There were somewhat conflicting worries expressed about too much linkage among donors so that debtors are faced with a virtual cartel with no room for maneuver and the wastefulness of having to negotiate in so many forums. One participant was so oppressed by the latter that he suggested that the IMF retreat entirely into technical assistance leaving the financial field to the World Bank (and bilateral donors) and perhaps nothing for the United Nations Development Program (UNDP). It is perhaps an index of the rapidly declining unpopularity of the IMF, at least in Africa, that this proposal went unsupported.
Discussion at the third and fourth sessions, which dealt with financing growth and development and trade, investment and growth prospects, inevitably got intertwined and indeed somewhat squeezed for want of time. The subjects are closely related, and a good deal of ground was covered earlier. Fortunately, the papers published here, particularly the one by the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), Mr. Dadzie, and the other by Governor Yansane are comprehensive enough to compensate for the brevity of discussion on issues relating to trade and investment.
If African development must be accelerated after the disastrous but educative decade of the 1980s, what can one reasonably say about the prospects for the 1990s? A useful point of departure in answering this question is provided by the World Bank paper presented in Session III, which presents at least one possible scenario. The rate of growth in Africa could accelerate to 4 percent a year in the early 1990s increasing further to 5 percent by the year 2000 if the rate of investment could be increased from 15 percent to 25 percent of gross domestic product (GDP), the incremental capital/output ratio reduced from 10 to 5 and the present rate of growth in official development assistance (ODA) in real terms of 4 percent a year, as well as the present framework of debt relief, continues. Even so, per capita incomes in Africa in the year 2000 would not quite return to the not-so-enviable level of 1980.
Can anything less be acceptable? But, is even this feasible? Some of the assumptions, for example, those regarding savings and the incremental capital/output ratio appear, prima facie, heroic. But already there are signs that things will be much better than assumed in some respects, for example, debt relief. Assumptions on aid are also not unrealistic and may well be conservative—there were suggestions that the World Bank tends to assume conservatively what is feasible on resource transfers and treats domestic effort as the residual for achieving the desired results. Undoubtedly, this reflects caution rather than callousness. But whatever it may be, there were African voices that supported the feasibility of a substantial improvement in the productivity of capital. Mr. Ndulu, as already noted, drew attention to unutilized capacity, and there were telling illustrations of how far productivity in Africa lags behind that in Asia in comparable fields. Also, authorities now are set more firmly against wasteful or grandiose investment.
As Mr. Killick rightly points out, finance is by no means the only or even the major constraint on growth. Shortage of skilled labor is perhaps a greater bottleneck, as several African governors noted. Clearly, this is not to discourage external support or internal effort to generate more savings and establish more effective financial intermediaries. But the effectiveness of financial intermediaries is perhaps greater in terms of the improvement in the quality of investment they can bring about rather than in promoting savings or reducing the transaction cost of bringing savers and investors together.
There are, contrary to the conspiracy of silence generally observed in this regard, political dimensions to growth as well, and these go far beyond the maintenance of law and order and the like. We know now that governments are not embodiments of objectivity and wisdom any more than they are trustees of the national interest. But they are there and are not likely to wither away despite the prophecies of the left and the proclivities of the extreme right. What can be done to minimize the harm they can do and to maximize the good they are capable of doing? There are no soothing or simple answers.
It is a sobering thought that the much-heralded four Asian tigers (Hong Kong, Korea, Taiwan Province of China, and Singapore) do have teeth that bite deeply into democratic norms and individual freedom with varying degrees of frequency and ferocity. Even so, one can perhaps say in favor of democracies that the transparency and possibility of change they imply is a safeguard against things going too far in the wrong direction. Even flawed democracies are less arbitrary and have a semblance of equality before the law. These and other aspects of freedom and individual dignity are essential parts of the kind of quality of life that alone can justify the emphasis on growth.
Whatever political system is desirable, it cannot be imposed from outside or guaranteed from inside. But international financial institutions and bilateral donors are concerned about at least some aspects of good governance, including a measure of transparency, evenhandedness, accountability, decisiveness, and good housekeeping. This was confirmed by Mr. Langley, who is at present an Executive Director of the World Bank. Somehow, even if a week is too long a period in politics and pleasing the voters is an integral part of the democratic tradition, a way has to be found whether through statesmanship or statecraft to minimize shortsightedness and to limit pork-barrel populism.
Africa’s trade prospects are rendered particularly difficult by its narrow productive base and the concentration on a few markets. It will be a long time before this situation changes. The structural weaknesses are further enhanced by the technological threat to commodity exports. And yet, these exports are far too important to be neglected. Africa will have to strive hard to retain whatever advantages or preferences it has, for example, under the Lomé Convention. Nor can it abandon the search for greater stability in its commodity terms of trade. Conventional commodity agreements, such as those that require production sharing, may be feasible only in a few cases. But there are other possibilities of individual action or cooperation between producers and consumers, as Mr. Dadzie points out.
Above all, Africa cannot be indifferent to international negotiations on trade, such as the current round of the General Agreement on Tariffs and Trade (GATT) in which Africa’s voice is muted. Liberalization of trade in agriculture, for example, may well affect adversely food importers, which is what most African countries are. But there was no African voice in GATT forums to draw attention to this and to demand at least transitional relief. In short, while Africa’s trade options may be limited now and its stake in a more open world-trading system not so clear, it still has such an excessive dependence on imports over a wide range that it has to fight even harder for its corner than the newly industrializing countries who can, in a pinch, be more self-sufficient.
The last session in which four panelists and myself provided their own summations or emphasis was a wrap-up session and I have drawn greatly in this introduction on what was said then. A new and important note was, however, struck in this session by Mr. Berg, who emphasized the extreme urgency of the problems and the moral imperative of tackling issues that go far beyond mere technical virtuosity. His reference to population and environment was one of the few references to these most vital matters; and if I have any regret, it is that more was not said on these matters by our African friends. But as they say in my country, you need one small blemish to enhance the beauty of the whole.
Abdul R. Turay
That Africa is in the throes of an economic crisis of major dimensions hardly needs emphasizing. Country variations notwithstanding, there are numerous manifestations of this situation: poor agricultural and industrial performance, deteriorating institutions and infrastructure, declining levels of per capita income, dismal levels of social welfare indicators, weak export performance, and high and unsustainable levels of external indebtedness.
A number of explanations have been posited for the causes of this crisis. The economies that evolved from the ravages of the colonial period were structured to cater to the needs of the colonial powers; these economies were sources of raw materials and markets for their finished products, rather than integrated entities, with mutually supporting production structures. Also, inappropriate models of development were adopted, which neglected the agricultural sector but emphasized suboptimal import-substituting industrialization strategies. Another problem not to be downplayed was the ubiquitous intervention of the state in economic activities that are best suited for the private sector. Closer to our responsibilities was the use of inappropriate macroeconomic policies resulting in unsustainable fiscal deficits, expansionary monetary policies, and external disequilibrium. But at the top of these factors was the impact of a hostile external economic environment characterized by adverse terms of trade, inadequate access to markets, declining flows of financial resources, and the perpetuation of a generally peripheral status in international economic arrangements. It is against this background that the subject of this symposium, “Structural Adjustment, External Debt, and Growth in Africa,” should be appreciated.
The goal that our national leaders have never lost sight of is the achievement of long-run sustainable growth. However, past attempts at accelerated development financed through substantial external borrowing to supplement meager domestic savings have, in the face of the structural inadequacies just referred to, yielded only minor successes and caused other problems. Prominent among the new problems is the debt crisis, which has hit African countries hard and has resulted in making international capital markets inaccessible to us.
The evident solution of going right to the source of the problem by reforming the structures of our economies is now upon us. But, structural adjustment programs are impossible to implement and sustain without financial support from foreign sources. It is consequently necessary that some framework be established within which past indebtedness and future funding requirements could be successfully addressed so that the goals of structural adjustment and growth do not become impossible to achieve. The interlinkages between structural adjustment, external debt, and growth are thus inescapable. These are important issues not just at the present conjuncture but also for the very future of our continent.
Structural Adjustment and Growth
Structural adjustment programs are now a common feature of the African scene. Numerous African governments, in their determination to correct the growing external and internal economic disequilibria that have become quasi-permanent in our countries, have adopted packages of reform measures, mostly in close consultation with the International Monetary Fund (IMF) and the World Bank and with their financial support. These measures embrace both facets of macroeconomic stabilization and structural reforms, and they aim at inducing our economic structures to be more responsive to free market signals. The implementation of these policies is closely watched by the international financial community and is invariably interpreted as an indication of willingness to change the direction of economic management in order to engineer sustainable growth and development.
Questions have been raised regarding the internal economic consistency of the measures built into the typical reform package, including its purely macroeconomic stabilization aspect. Their effectiveness in achieving the desired ends, especially in the context of African economies, is in doubt, and this doubt is strengthened by empirical studies. For example, doubts have been expressed regarding the compatibility of exchange rate devaluation and reduction of inflation and, indeed, the positive response of export sectors to such exchange rate changes. In this context, it has been stressed that rigidities and bottlenecks in our economic structures defy adjustment by the traditional preferred policy instruments of the Bretton Woods institutions.
In addition to these economic concerns are the practical issues, such as the cost of adjustment in human and political terms. This concern is now analyzed under the rubric of the social costs of adjustment. There is the admission that labor retrenchment and higher prices of goods and services resulting from the removal of subsidies, especially in the areas of health care and education, are regressive in their effects on the populace. Subsidiary or integrated programs have been devised in response. Special attention is consequently being paid to the needs of those considered least able to absorb these shocks. But it is not certain that these subsidiary programs are adequate in their scope and intent, or reach the target groups. Societal reactions to the austerity brought in the wake of structural adjustment programs continue sporadically to cause governments to abort programs because of fear of political and social unrest.
Regarding the achievement of desired goals, empirical research reveals major shortcomings in terms of the effects on the balance of payments, the rate of economic growth and its composition, the reduction of inflation, or the more imponderable social adjustments. Indeed, it is questioned whether African governments have concluded structural adjustment programs because of their conviction that the programs would yield desired results or merely because they appreciate the importance of being perceived to be cooperating with the Bretton Woods institutions, in order to have access to funds from donor countries and other international capital markets.
That the external debt problem of Africa is as severe as Latin America’s, from the point of view of the debtors, if not more severe, is now widely recognized. However, it is still not receiving the attention it deserves, because Africa’s debt problem is now primarily noncommercial bank debt and is, therefore, considered less of a threat to the international banking and financial system than is Latin America’s. This is deplorable because the human costs to Africa are far higher, far more dramatic.
The statistics show a very sharp increase of over 600 percent in the aggregate debt of the region over the 1970s and 1980s, with an equally staggering burden in the region’s debt-service requirements. This predicament is aggravated by the recent catastrophic evolution of the terms of trade of the region, compounded by the rise in world interest rates during the 1980s. Net capital movements for a couple of years were negative, translating into outflows rather than inflows.
Africa’s debt problem had its origins in external borrowing to finance development. The a posteriori pronouncement for the course of the failure is that the projects financed with borrowed funds had not been selected wisely; little consideration had been given to their economic return. The important element from our point of view is that in most cases funds were expended on infrastructural projects that indeed facilitated the process of economic and social development. They did not, however, yield returns directly usable for the servicing of the debts incurred for their realization. The resulting inability to service these debts promoted even more foreign borrowing, to settle past obligations. This strategy did not lead to the enhancement of capacity or the creation of production facilities. A further complication arose from the pressure on available tax revenue to meet not only debt-servicing requirements but also the servicing of other governmental responsibilities. Deficit financing became inevitable, with its associated monetary expansion.
The conclusions call for a search for new approaches to the African debt problem. Most pressing is the problem of countries in arrears to the IMF. The new IMF approach of “rights accumulation” programs does not guarantee that these countries will be able to manage a credible adjustment program without front-loaded external support being in place. The African countries are experiencing intense anxiety in the face of a relapse into the negative capital flows of a couple of years back, the diversion of scarce funds to newly liberalized East European countries, the marginalization of their external debt worries, and prolonged loss of ground in development. New ways need to be found to address these concerns.
African countries in turn are committed to continue implementing adjustment programs to achieve a greater degree of self-sufficiency. In particular, growth-oriented programs should focus on action to increase domestic savings and attract the return of flight capital. The encouragement of private savings should be pursued through the offer of attractive rates of interest and the promotion of appropriate financial institutions. Public savings should also be boosted where possible by exploiting untapped tax avenues and containing public expenditure within limits consistent with the efficient provision of service. With regard to the latter aspect, expenditure patterns should be scrutinized carefully and realistically, with a view to eliminating wasteful and avoidable outlays. The quality of development projects should also be scrutinized to ensure maximum social returns. Attention should also be given to the policy of contracting loans. Given the present debt overhang, contracting loans of comparatively short maturity at market interest rates should be avoided as far as possible. Concentration should be on loans obtained on concessional terms for the realization of worthwhile projects.
The foregoing survey is unavoidably incomprehensive. It no doubt leaves out some vital issues and oversimplifies others in its broad sweep. The intention, however, was first to attempt to show the interrelationship between debt and economic growth in Africa, and second to provoke you to a more detailed and specific discussion of the relevant issues that I have not covered. The subject for our discourse is not only topical but of such importance to the future of Africa that it deserves the most intensive and comprehensive discussion possible.
The ongoing search for solutions to our problems will require African central bank governors to probe with increased urgency the implementation of regional economic and monetary cooperation, beyond matters that we shall discuss in this symposium. In addition, I should like to call the attention of the Managing Director, Mr. Michel Camdessus, to the urgency we central bank governors attach to the development of technical capacities in our institutions if we are to efficiently proceed with the implementation of the program of reform in our respective countries.
Allow me to tell you it is my pleasure to have, thanks to the generous hospitality of the Government of Botswana and its Central Bank, this unique occasion to meet with my former colleagues, the central bank governors of Africa and so many of my present Governors. My pleasure is very special as I have just visited three African countries, Mozambique, Zimbabwe, and Zambia, with which the IMF shares very important cooperation, and we are here in a country all of you consider a remarkable example of wise and efficient macroeconomic management. What a good time and what a good place for sharing experiences and thoughts!
Yet Africa is experiencing difficult times: times of natural disasters and setbacks, times, also, of man-made problems including wars and civil disorders. After some twenty years of disappointing performance in much of Africa, resulting in lower real per capita incomes, it is easy to understand why many feel tempted to despair about the prospects. Moreover, the global economic environment is worsening, with the Middle East war and the slowdown in some industrial countries, while the suspension of the Uruguay Round raises questions about the prospects for world trade. These setbacks compound the existing external difficulties, including the shortage of external financing and slow progress toward resolving the debt problem.
But in contrast to all this, we also see the encouraging achievements of those countries that have prudently managed their resources and steadfastly pursued their reform programs. Consider the encouraging recent record of the nearly thirty African countries that have been persevering with growth-oriented adjustment programs. The programs are producing results—positive real growth, the steady transformation and improvement of their economic structures and systems, and, in particular, an improvement in the living standards of the rural population.
This very difficult global situation, and the experience of the three countries I have just visited, reminds me forcefully that African countries and the international community together cannot escape a joint responsibility. More solid economic progress is achievable, but only if we reinforce what I call the unwritten law of international cooperation: that countries should implement appropriate policies to the best of their ability, and that these policies should be supported by creditors and donors.
What does this mean at present?
In terms of domestic policies, it means steady macroeconomic discipline and far-reaching structural reforms to achieve sustainable growth in a medium-term context. This is the approach that the lessons of experience suggest. I have welcomed such pragmatism in the economic strategies of many African governments. We see strong evidence of this in the countries whose economic strategies the IMF is supporting with financial and technical assistance. This realistic approach holds the promise of sustained positive growth per capita, an objective nobody could consider overambitious.
It is true that structural reforms do not produce their full results quickly. One cannot expect to correct in a few years what has sometimes been decades of structural misadjustment. The results so far have been modest in some cases, at least partly because of the legacy of mistaken investment priorities and development strategies that were for too long inward looking and based excessively on state interventionism. It is taking time to rectify these policies and to move toward a more productive economic system—in which private entrepreneurship is encouraged, given sufficient scope, and allowed to flourish. It is also taking time to adjust the role of the public sector to its proper function in a modern market-based economy.
It is not surprising that those African countries (such as Botswana and Mauritius) that were quick to deal with their economic problems and showed firm economic management have achieved an enviable economic performance. Equally important, a significant number of African countries (The Gambia, Ghana, Kenya, Malawi, Morocco, Nigeria, Senegal, Togo, and Tunisia—but of course that is not a complete list!) have been implementing far-reaching structural reforms for several years. These reforms are yielding encouraging results, and their long-term benefits will be reaped increasingly in the period ahead. Certain countries—including Mozambique, Tanzania, and Uganda—that are still experiencing severe economic difficulties are already seeing significant results from their commitment to effective adjustment programs, including a revival of economic growth or slower domestic inflation, or both. I was particularly delighted to be in Harare, Zimbabwe, at the moment when our common friend Senior Minister Chidzero was launching, with our full support, a comprehensive “Framework for Economic Reform” covering the 1991–95 period. The sheer diversity of these programs—even if they reflect common basic principles—demonstrates clearly the importance we attach to support really homegrown programs, thereby increasing the chances of being better understood and supported by public opinion.
Truly, in many countries, we see encouraging signs. Clearly, there is a definite need for further structural improvements. In each country there are sectors where the progress has been inadequate. One of these is of particular concern to the central bankers gathered for this symposium; I refer to the urgent need to reform and strengthen the commercial banking sectors in several countries. This is particularly important where we see insolvent banks, an overhang of nonperforming loans, a banking structure that does not promote competition, and the persistence of negative real interest rates. These weaknesses in banking systems hamper the development of competitive and productive economies and render more difficult the conduct of sound policies. And in most countries, I believe, there is scope for more vigorous measures to promote private sector activity, decentralize decision making, and reduce the stifling impact of excessive state intervention and unnecessary bureaucracy. All this simply underlines the need for persistence in forcing through the structural and systemic changes that are a necessary condition, though never sufficient in themselves, for the creation of a more productive and viable economy.
So far I have stressed the responsibility of the Africans themselves. They know that the primary task rests with them, with their governments, and with their people to forge their own destiny. Help from outside is indispensable. But it can only supplement these countries’ own efforts. The experience of the Fund in recent years has been that governments are more likely to find success if their programs are both well designed technically and broadly supported by the public. This implies, in particular, that these programs ensure that the vulnerable members of society are cushioned from the most severe transitional consequences of necessary adjustment. This is not only compatible with, but effectively supportive of, the process of adjustment for growth.
Increasingly, we are seeing that effective political leadership involves a complex process to marshal a consensus behind a coherent medium-term strategy. Hence the increased emphasis in Africa on improving the “qualitative” design of economic programs. This is reflected in a greater concern to ensure that revenue systems are efficient and fair, and public expenditure is channeled in accordance with economic and social priorities. In many countries, we hear loud and really justified criticism of expensive, if not extravagant, projects or excessive military spending. In times of such scarce saving and such pressing basic needs, this has got to be corrected. I do hope that the relaxation of regional tensions, particularly in Southern Africa, will be seen by the governments of this area as a favorable occasion to demonstrate their commitment to reduce such expenditures to a minimum. Acting simultaneously and, why not, in a coordinated fashion, could allow them to be bolder than acting on their own. Let us hope that this could enable all countries of Southern Africa to use the resulting “peace dividend” to meet pressing needs, and to pay greater attention to the development of human capital.
These are only a few aspects of the growing demand in Africa for “good governance,” meaning more responsive and accountable governments, and for more pluralistic systems of political representation. These trends are improving the chances for economic and systemic reforms to be better understood, better accepted, and so more successful. That is why they are particularly welcomed by Africa’s friends.
In discharging these demanding responsibilities, governments can be most effectively supported by bold regional cooperation as underscored in the Lagos Plan of action. If anything, my recent stay in Southern Africa has further brought to my attention the formidable potential for additional economic efficiency your countries could release in forging closer regional ties. There is no need to tell you that we, in the IMF, look forward to strengthening our relationships with key regional organizations in Africa and particularly with the Southern African Development Coordination Conference (SADCC).
In retrospect, the experience of Africa with regional cooperation offers some useful lessons. First, it may be helpful to start with modest but feasible programs of cooperation, by focusing on selected areas where the prospects for mutual benefit are largest. Cooperation along this line, as exemplified by SADCC, can concentrate on specific areas, such as transportation, energy, industry, and banking. Second, efforts at economic integration stand a better chance of succeeding if they are also outward looking. Economic integration at the regional level and in the world economy are not incompatible. It is important that a reduction of trade barriers within any region be accompanied by measures to reduce domestic distortions, liberalize markets, and improve competitiveness. Regional cooperation is most effective if it is accompanied by careful harmonization by the cooperating countries of their policies in key areas; in particular, to increase the scope for trade with the outside world. The ultimate aim must be to ensure that African exports are competitive in the industrial countries. And here also, how could I refrain from mentioning that seeing key countries in the area now implementing economic policies inspired by the same principles, I do believe that prospects for fruitful regional cooperation are made even more promising and could at the appropriate time culminate in various forms of monetary arrangements.
More effective policies in African countries will not succeed—however—and this is my second main proposition—unless their reform programs are adequately supported by the rest of the world. I repeat, the responsibility for development and for economic adjustment is a shared one. The industrial countries, in particular, have a special duty to Africa. In the more difficult global economic environment of today, I would like to focus on three main areas: the level of activity in the industrial countries, finance, and trade.
First, the long expansionary phase in the industrial countries has recently faltered, with slowdowns in some major countries. It will be important for Africa that the industrial countries, which are the major market for its exports, resume growth at sustainable rates. The Fund expects that the present slowdown will be relatively shallow and short. Because any artificial boost to their activity would be self-defeating, the IMF is recommending a cautious fiscal and monetary policy stance for the industrial countries. We think that policies should be geared mainly to ensuring that the next expansionary phase will be a healthy one. Therefore, we are stressing the desirability of continued fiscal consolidation, as the most effective means of bringing about a rise in national savings rates. This will be very important, in view of the global shortage of savings, as will the need to provide for substantial levels of investment in the period ahead, not only in the industrial countries themselves, but also in Eastern Europe, Latin America, Africa, and elsewhere. It is only through an improvement in savings performance that a consolidation of the present downward trend in global real interest rates will be possible—which would be very helpful to the developing countries.
Second, finance. The prospects for some of the traditional sources of external finance are not encouraging. It would be unwise to expect a buoyant provision of bilateral or multilateral development assistance in the period immediately ahead. The most recent projections of the Development Assistance Committee (DAC) point to only a modest nominal rise. The commercial banks are showing a reluctance to extend new finance to developing countries on the scale of a few years back. Of course, we should beware of overgeneralizing. The banks are lending, on a careful and selective basis, to the most creditworthy countries. But much of Africa will clearly need to rely heavily in the period ahead on domestic sources of finance (including the return of flight capital) and on nonbank types of private foreign capital.
In my view, the industrial countries can improve their provision of finance to Africa in three ways. First, even if their provision of official development assistance (ODA) is not expected to grow substantially in the years immediately ahead, they can do much to ensure that these scarce resources are channeled in ways that contribute to development in direct and productive ways. I am encouraged by the growing evidence that donors are working to enhance the usefulness of their assistance, while streamlining their procedures for approval and disbursement. Second, they could increase the proportion of grants in total ODA. And a third avenue is in the area of debt relief; much progress has already been achieved, in the cooperative framework of the Paris Club, particularly under the active and talented chairmanship of J.C. Trichet and D. Samuel-Lajeunesse. There have been several useful initiatives on debt—including that proposed by Mr. Major when he was still Chancellor of the Exchequer—and I understand that the industrial countries are working hard to provide these initiatives with constructive responses. In our view, in many cases they can be of critical importance.
Trade is the third area where the industrial countries need to act soon, and forcefully, to improve the global economic environment. A meaningful reduction of trade barriers, in the context of the Uruguay Round, is essential. It will reinvigorate the expansion of the industrial countries themselves, and create the prospects of stronger trade for all countries. The importance of this open door policy for Africa, and in particular for those African countries that are implementing outward-looking reform programs, is self-evident. The present opportunity should not be missed.
Last, let me add a brief word on the IMF’s own contribution. The Fund also shares the responsibility for Africa’s future. As many of you know, this is a subject that is close to my heart! Nobody needs to be reassured here that the Fund will help Africa face the challenges that lie ahead. We now have concessional facilities, the structural adjustment facility (SAF) and the enhanced structural adjustment facility (ESAF)—quite essential in the case of Zambia and Mozambique—which are tailor-made mechanisms for helping any low-income African country that seeks to achieve long-term and sustained growth through structural reforms. We are ready, as we have shown with the creation of the rights approach, from which, I hope, Zambia will promptly benefit, and with our response to the recent oil shock, to adapt as needed our instruments to the emerging problems. The Fund, as I noted, is currently supporting the programs of nearly thirty African countries. The Fund stands ready to help all others, and is impatient to do so, both with technical assistance and with financial support as soon as they are ready to embark on sound programs. If the quota increase is promptly ratified—and for that a positive vote on the Third Amendment of the Articles of Agreement is essential—we will have the financial resources: what we need are more countries to come forward with well-designed programs.
I should like to end by mentioning something that has come up in each of the African countries that I have visited in the last week. Everywhere, I have been asked if the large amounts of assistance that the IMF is extending to others, including Eastern Europe, will oblige it to shortchange Africa. My answer is a definite “no.” No Fund resources will be shifted. The Fund will support good economic programs in all member countries and with the same heartfelt commitment continue to help to catalyze support from other sources. That is our basic mandate.
After visiting Mozambique, Zimbabwe, and Zambia, and being today in Botswana, I believe more than ever that mediocre performances in this continent are not inevitable. It is my deep conviction that many countries in Africa can find in the 1990s their own window of opportunity for successfully launching homegrown programs, which could deserve strong international support and find added efficiency in active regional cooperation. We will be proud to support them.