- Laura Wallace
- Published Date:
- January 1999
© 1999 International Monetary Fund
Production: IMF Graphics Section
Cover design and figures: Luisa Menjivar-Macdonald
Typesetting: Alicia Etchebarne-Bourdin
Cover image: Strip Cloth, Asante peoples, Ghana, cotton, silk, H × W: 158 × 97.8 cm (623/16 × 38½ in), National Museum of African Art, National Museum of Natural History, purchased with funds provided by the Smithsonian Collections Acquisition Program, 1983–85, Lamb EJ10598, Photograph by Franko Khoury
Library of Congress Cataloging-in-Publication Data
Africa: adjusting to the challenges of globalization/editor, Laura Wallace.
“Proceedings of a seminar held in Paris, May 4–5, 1998.”
Includes bibliographical references.
1. Free trade—Africa—Congresses. 2. Structural adjustment (Economic policy)—Africa—Congresses. 3. Investments, Foreign—Africa—Congresses. 4. Africa—Economic policy—Congresses. I. Wallace, Laura.
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Emmanuel Tumusiime Mutebile
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… to indicate that data are not available;
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– between years or months (e.g., 1998–99 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
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“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this book, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
On May 4–5, 1998, senior officials and private sector agents from more than 20 African and Asian countries, and staff from the IMF, the World Bank, and other multilateral institutions, met in Paris for a seminar on Adjusting to the Challenges of Globalization in Africa. It was the fourth in a series that began in 1994, intended to provide a forum for exchanging views on economic policies and financing strategies that could deepen the structural reform process in Africa. This seminar—sponsored by the Japanese Ministry of Finance and organized jointly with the IMF—was also meant to serve as a stepping stone between the recently completed external evaluation of the IMF’s Enhanced Structural Adjustment Facility, its concessional loan facility for low-income countries, and the second Tokyo International Conference on African Development in October 1998.
The seminar was held at a time when Africa’s economic performance and outlook were improving. After two decades of lost opportunities, real GDP was, on average, growing at 4–5 percent—for the most part thanks to sound economic policies—and per capita incomes were on the rise; gains that sub-Saharan Africa has managed largely to hold on to. Yet, Africa needs much faster growth if it is to make up for lost ground and make a real impact on poverty reduction. The seminar was thus cast around finding ways to sustain and accelerate Africa’s growth in a globalized world economy.
The seminar focused on two topics. First was improving the environment for private investment and activity, and taking better advantage of the benefits of globalization, with sessions held on approaches to fostering a good regulatory environment, developing sound banking systems and practices, and liberalizing the trade system. Second was strengthening the contribution of government, especially in the areas of capacity building, good governance, effective public resource management, and improving the quality and composition of government spending. These topics were viewed against the backdrop of what lessons Africa could learn from East Asia—both from its decades of remarkable growth and development, and from its 1997–98 financial crisis.
In the papers and discussions, several broad themes emerged. First, we should be careful not to overreact to the recent Asian financial crisis and, in the process, throw out the good with the bad. Asia’s remarkable growth had been brought about, in large part, by its open and flexible markets; so the answer was to move ahead with liberalization efforts, but to do so in a way that careful attention is paid to sequencing and needed safeguards.
Even so, there was reason to rethink the overall growth strategy, given today’s increasingly globalized environment. Even in May 1998—an early stage of reflections on the lessons of the Asian financial crisis—it was apparent that a central element of the answer likely laid in a new focus on transparency and accountability, or what is commonly called good governance. This would involve redefining the roles and responsibilities of the public sector and government, the private sector, and international institutions. For countries, that means creating modern administrations with competent civil servants, which, in turn, calls for capacity building—an area where the multilateral institutions and bilateral donors can be of much help. Programs and technical assistance should be more demand-driven, however, with country ownership of reforms a must.
Second, we need better communication both within African countries and between African countries and the rest of the world. This means engaging all stakeholders in a constructive domestic dialogue on reform, thereby encouraging country ownership, and hence giving reform greater credibility and inviting a positive response in private sector activity. It also means bridging the “image gap” between the old and emerging Africa. As several African participants pointed out, many of their countries had made great progress in recent years, and yet outside investors were hesitant to respond. While the onus was on Africa to tell the world of its successes, bilateral donors and multilateral institutions could do more to spread the word.
Third, we need to take a more holistic approach toward economic, financial, and social reforms. This means moving away from an individual project approach to a sectoral approach, couched within medium-term expenditure frameworks. Indeed, this is already beginning to happen, with its many challenges—such as establishing good practice guidelines for donor coordination and assistance to help achieve better policy coherence.
The IMF, for its part, has taken numerous steps in recent years, reflecting lessons learned in seminars such as this one and the many internal and external evaluations that have been undertaken on our programs and policies. The emphasis has been on helping countries establish sound financial systems and institutions, transparency, ownership—embracing the various segments of civil society—and more effective social policies in order to promote poverty reduction. In keeping with this spirit of greater openness, we have steadily opened up and broadened our own dialogue with member countries.
Building on these steps, at the September 1999 Annual Meetings of the IMF and World Bank, the two institutions agreed to put country-led poverty reduction strategies at the heart of their lending programs for the world’s poorer countries. This is part of a coherent strategy to help poor countries move on to a sustainable faster growth path, bringing a substantial reduction in poverty—a strategy that will need to include sound macroeconomic policies. The new Poverty Reduction and Growth Facility, which replaces ESAF, is founded on this strategy and is designed to ensure consistency between the country’s macroeconomic, structural, and social policies in a mutually reinforcing fashion. We look forward to working with the entire development community, with renewed vigor, on making the new millennium one that is characterized by prosperity, peace, and stability for all.
Policy Development and Review Department
International Monetary Fund
The seminar was organized by Hirofumi Suzuki of the International Finance Bureau of the Ministry of Finance of Japan; Daiho Fujii of the Office of the Executive Director for Japan in the International Monetary Fund; and Louis Dicks-Mireaux, Elliott Harris, and Il Houng Lee of the IMF. Help with the logistical arrangements in Washington, DC, was provided by Cecilia Lon and, in Paris, by Ghislaine Roche and Christine Ursenbach of the IMF’s Paris Office. I would like to thank Helen Chin of the IMF’s External Relations Department for her skillful style editing and for preparing the volume for publication.
Asia-Pacific Economic Cooperation
Enhanced Structural Adjustment Facility
Group of Seven
Heavily Indebted Poor Countries
International Development Association
medium-term expenditure framework
Organization for Economic Cooperation and Development