Mr. Jan Kees Martijn, Gabriel Di Bella, Mr. Shamsuddin Tareq, Mr. Benedict J. Clements, and Mr. Abebe Aemro Selassie
Macroeconomic outcomes in low-income countries (LICs) have improved markedly in recent years, but important questions remain regarding possible adjustments in the design of IMF-supported programs in such countries. This paper draws on a review of the literature as well as the experience of 15 LICs that have attained some degree of macroeconomic stability to discuss, for example, the appropriate target range for inflation in shock-prone LICs; whether countries should use fiscal space to cut excessive tax burdens, reduce high debt levels, or raise public spending; and how the effectiveness of public expenditures can be improved.
Sub-Saharan Africa is contending with an unprecedented health and economic crisis—one that, in just a few months, has jeopardized years of hard-won development gains and upended the lives and livelihoods of millions.
International Monetary Fund. External Relations Dept.
In 2004/05, Ethiopia experienced a second successive year of rapid economic growth, at close to 9 percent; growth of 5 percent is projected for 2005/06. But the country continues to face political uncertainties including unresolved tensions stemming from the May 2005 national elections, which have adversely affected donor support. Ethiopia’s largely agricultural economy also remains vulnerable to variations in weather, which have resulted in wide swings in output that have had severe effects on the poor, the IMF said in its most recent annual economic review.
This Selected Issues paper examines the causes of recent inflation in Ethiopia and discusses possible policy responses. Inflation in Ethiopia has reached a historical peak. Following a drought-related surge of food prices in 2003, it receded to single digits but soon turned back up in 2004 and gradually increased. The paper provides an overview of recent inflation developments, and explores the factors contributing to recent inflation, based on fresh studies and the review of current monetary and external developments. The paper also lays out cross-country analysis with countries experiencing high inflation.
This 2013 Article IV Consultation highlights that recent macroeconomic developments in The Federal Democratic Republic of Ethiopia are encouraging, with a significant deceleration in inflation and continued robust economic growth. Despite significant decline in coffee prices and supply bottlenecks, growth remains robust, supported by better agriculture output and construction and other services activities. Inflation declined from the peak of 40 percent in July 2011 to about 7 percent in June 2013. This has significantly eased the extent to which real interest rates were negative. Fiscal policy at the general government level remains prudent with cautious execution of the government budget.
This paper elaborates the introduction of surveillance that gave the IMF broader responsibilities with respect to oversight of its members’ policies than existed under the par value system. The IMF’s purview has been broadened under the new system but, by the same token, its members are no longer obliged to seek its concurrence in changes in exchange rates. The continuing volatility of exchange rates, and their prolonged divergence from levels that appear to be sustainable over time, have been matters of growing concern.
Mr. Andrew Berg, Mr. Shekhar Aiyar, and Mr. Mumtaz Hussain
Aid facilitates a transfer of resources from donor to recipient countries that enables the recipients to increase consumption and investment. It thus presents an opportunity to reduce poverty, increase the standard of living, and generate sustained growth. However, the effective use of increased aid also presents challenges. Good projects must be found and managed, and conditions for budgetary support must be agreed upon and implemented. The imperative to use the funds well can strain the administrative capacity of recipient governments. In addition, aid flows can weaken country ownership of economic and social policies.