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Abstract
Since the mid-1980s but more so since the turn of this decade, sub-Saharan African countries have made more progress reforming their financial systems than they did for the first 20 years of independence. Indeed, in the 1970s and 1980s, a combination of poor policy choices and internal and external economic and, in some cases, political shocks not only militated against the early development of the financial sector, but may also have led to a deterioration of the institutional arrangements for efficient monetary policy formulation and implementation. During this period, newly independent countries' perception of the financial sector's role in economic development shifted: financial systems were viewed as conduits for financing government expenditures (both fiscal and quasi-fiscal) and as instruments for the disbursement of directed credit to “priority” sectors of the economy. This shift and the resulting policy choices stemmed largely from these countries' perceived need to accelerate their economic development following independence, and the government was seen as the best vehicle for achieving rapid economic growth. Hence, the dominance of government in the financial sector during this period.
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