Although governments in Africa are embarking on comprehensive economic reforms intended to create an environment that is friendly to private enterprise, more action is required to attract more domestic and foreign investments if faster economic development is to be achieved. Areas that require urgent attention include the following.
The formulation of an appropriate policy framework for effective resource mobilization in Africa must begin with an assessment of the role that the financial sector has played in the region’s economy, and the shortcomings that it may have faced in mobilizing the necessary resources for investment. In the contemporary African context, efficient functioning of the financial sector takes on added significance for at least three reasons. First, if the region is to emerge from the economic crisis of the last decade and a half, the financial sector must contribute to the recovery through the enhancement of the savings-investment process. Second, the widespread economic liberalization programs that have swept across Africa put greater reliance on the private sector, which clearly requires efficient institutions to meet its financing requirements. And third, increasing competitiveness in the global economy requires that the financial system be efficient and flexible enough to support the region’s external economic relations.
Over the three years since the crisis broke out in 1997, the five Asian countries—Indonesia, Korea, Thailand, Malaysia, and Philippines—managed impressive recoveries. The recoveries were faster than expected by anyone. The economies started to bottom out in the second half of 1998. The rebound of growth in 1999 was no less drastic than its free-fall. In Korea, for example, the growth rates showed a turnaround from −6.7 percent in 1998 to 10.7 percent in 1999.
A developed fiscal framework is based on several fiscal institutions that contribute to fiscal and macroeconomic performance: a formal process of government budget planning, congressional discussion and approval, execution, and accountability; fiscal rules; sovereign wealth funds; and fiscal councils.
In April 1998, a Consumer Electronic Payments Task Force established a year and a half earlier by Secretary of the Treasury Robert E. Rubin to “identify consumer issues raised by emerging electronic money technologies and to determine how to address these issues without unnecessarily inhibiting the development of this market” released a report addressing four areas of consumer concern: Access, Privacy, Financial Condition of Issuers, and Consumer Protections and Disclosures.1 In each of these areas, the task force summarized, analyzed, and made recommendations based on comments that it had received “through a series of informal information exchanges with firms involved in e-money systems, financial services industry representatives, and consumer and other public interest advocates.”
On behalf of the International Monetary Fund, it is a great pleasure to welcome you to this high-level seminar on the New Partnership for Africa’s Development (NEPAD), and to thank you for taking part in the discussions over the next three days.
For Africa, making effective use of aid is as crucial as having adequate volumes. Aid budgets of most of the major bilateral donors are under great pressure. Globally, this decline has not yet shown up in disbursements, which still reflect past commitments at higher levels. But in the coming years, present levels of concessional flows are unlikely to be sustained. Consequently, improvement of aid effectiveness is high on the agenda of both bilateral and multilateral aid agencies.
After the breakup of the Soviet Union, the CIS-7 faced exceptional challenges in building new states, democratic institutions, and market economies. All of the CIS-7 started from a situation of complex dependency on the Soviet Union, including massive transfers and subsidies and the trade arrangements of the Council for Mutual Economic Assistance (CMEA). The shocks associated with the breakup—notably the disruption of economic relations with established regional partners, termination of large fiscal transfers, and severe energy price adjustments—compounded the problems of severe structural rigidities and weak institutions.