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Hilary Devine, Adrian Peralta-Alva, Hoda Selim, Preya Sharma, Ludger Wocken, and Luc Eyraud
The Covid-19 pandemic has aggravated the tension between large development needs in infrastructure and scarce public resources. To alleviate this tension and promote a strong and job-rich recovery from the crisis, Africa needs to mobilize more financing from and to the private sector.
Ms. Manal Fouad, Chishiro Matsumoto, Rui Monteiro, Isabel Rial, and Ozlem Aydin Sakrak
Investment in infrastructure can be a driving force of the economic recovery in the aftermath of the COVID-19 pandemic in the context of shrinking fiscal space. Public-private partnerships (PPP) bring a promise of efficiency when carefully designed and managed, to avoid creating unnecessary fiscal risks. But fiscal illusions prevent an understanding the sources of fiscal risks, which arise in all infrastructure projects, and that in PPPs present specific characteristics that need to be addressed. PPP contracts are also affected by implicit fiscal risks when they are poorly designed, particularly when a government signs a PPP contract for a project with no financial sustainability. This paper reviews the advantages and inconveniences of PPPs, discusses the fiscal illusions affecting them, identifies a diversity of fiscal risks, and presents the essentials of PPP fiscal risk management.
International Monetary Fund. African Dept.
This Selected Issues paper studies the growth-inflation trade-off of monetary policy in South Africa. The combination of low growth and stubbornly high inflation expectations for a protracted period has complicated monetary policy decisions. The IMF staff analysis contributes to the ongoing growth-inflation trade-off discussion in South Africa, concluding that there is limited growth trade-off of monetary policy efforts to anchor inflation expectations at a lower level at present. The findings in this note suggest that the South African Reserve Bank should continue its efforts of anchoring inflation and inflation expectations at a lower level because monetary policy lends limited support to growth dampened by structural issues. During the 2010s, domestic demand growth responded little to monetary policy action. The environment of weak growth, low interest rates, and relatively moderate inflation (expectations) could have muted monetary policy transmission. Ultimately, the constraints to economic growth need to be removed. Meanwhile, inflation expectations continue to respond to monetary policy action albeit to a lesser extent. Monetary policy transmission through demand has weakened––demand growth does not systematically respond to monetary policy action nor does core inflation––but the exchange rate and credibility channels appear to remain operational.
Manoj Atolia, Bin Grace Li, Ricardo Marto, and Mr. Giovanni Melina
Why do governments in developing economies invest in roads and not enough in schools? In the presence of distortionary taxation and debt aversion, the different pace at which roads and schools contribute to economic growth turns out to be central to this decision. Specifically, while costs are front-loaded for both types of investment, the growth benefits of schools accrue with a delay. To put things in perspective, with a “big push,” even assuming a large (15 percent) return differential in favor of schools, the government would still limit the fraction of the investment scale-up going to schools to about a half. Besides debt aversion, political myopia also turns out to be a crucial determinant of public investment composition. A “big push,” by accelerating growth outcomes, mitigates myopia—but at the expense of greater risks to fiscal and debt sustainability. Tied concessional financing and grants can potentially mitigate the adverse effects of both debt aversion and political myopia.
International Monetary Fund. African Dept.
This 2014 Article IV Consultation highlights that South Africa’s growth has slowed in recent years, specifically relative to other emerging markets. Although weak trading partners’ growth contributed to the slowdown, increasingly binding structural constraints, such as protracted strikes and electricity constraints, have been important factors. Unemployment remains high at 25.5 percent. Notwithstanding expenditure discipline, the general government budget deficit was 4.5 percent of GDP in 2013, and public debt rose to 45 percent of GDP from 27 percent in 2008. The outlook is lackluster with considerable risks. Growth is projected to slow to 1.4 percent in 2014 and rebound only modestly to 2.1 percent in 2015 on improved industrial relations.
International Monetary Fund

Abstract

La croissance économique de l’Afrique subsaharienne devrait rester vigoureuse, grâce à l’investissement dans les infrastructures et à une abondante production agricole. En Guinée, au Libéria et en Sierra Leone, l’épidémie de fièvre Ébola a de lourdes conséquences, avec des répercussions dans les pays adjacents. Les risques externes pesant sur les perspectives globalement positives pour la région ont trait aux conditions financières mondiales et à un ralentissement de la croissance des pays émergents.

International Monetary Fund

Abstract

Growth in much of Sub-Saharan Africa is expected to remain strong, driven by efforts to invest in infrastructure and strong agricultural production. The current Ebola outbreak in Guinea, Liberia, and Sierra Leone is exacting a heavy toll, with spillovers to neighboring countries. External threats to the region's overall positive outlook include global financial conditions and a slowdown in emerging market growth.

Ms. Doris C Ross, Victor Duarte Lledo, Mr. Alex Segura-Ubiergo, Mr. Yuan Xiao, Ms. Iyabo Masha, Mr. Alun H. Thomas, and Mr. Keiichiro Inui
The countries in the East African Community (EAC) are among the fastest-growing economies in sub-Saharan Africa. This report highlights Mozambique’s remarkably strong growth over the two decades since the end of the civil war in 1992, as well as the major challenges that remain for the country to rise out of poverty and further its economic development.
Ms. Doris C Ross, Victor Duarte Lledo, Mr. Alex Segura-Ubiergo, Mr. Yuan Xiao, Ms. Iyabo Masha, Mr. Alun H. Thomas, and Mr. Keiichiro Inui
La présente publication met en exergue la croissance remarquablement vigoureuse du Mozambique au cours des vingt dernières années depuis la fin de la guerre civile en 1992, ainsi que les obstacles principaux que le pays doit encore surmonter pour sortir de la pauvreté et poursuivre son développement économique. Les chapitres portent entre autres sur les thèmes suivants : le rôle des mégaprojets et leur rapport à l'emploi et la croissance ; l'infrastructure et l'investissement public ; le Mozambique sur la voie de la croissance inclusive ; le développement du secteur agricole ; et l'établissement d'un socle de protection sociale.
Ms. Doris C Ross, Victor Duarte Lledo, Mr. Alex Segura-Ubiergo, Mr. Yuan Xiao, Ms. Iyabo Masha, Mr. Alun H. Thomas, and Mr. Keiichiro Inui
This publication highlights Mozambique’s remarkably strong growth over the two decades since the end of the civil war in 1992, as well as the major challenges that remain for the country to rise out of poverty and further its economic development. Chapters explore such topics as the role of megaprojects and their relationship to jobs and growth; infrastructure and public investment; Mozambique's quest for inclusive growth; developing the agricultural sector; and building a social protection floor.