Disclaimer: The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management.

The Financial Crisis and Decades of Reforms: Options for Africa’s Future

Reforms

May 2009

Antoinette Monsio SayehDirector, African Department

International Monetary Fund

Agenda

What can we learn from Africa’s reform successes and how can these reforms be preserved or deepened?

How should African governments handle the domestic fallout of the ongoing crisis and push forward with economic and

trade reforms?

What is the role of the state vis-à-vis the private sector in weathering the storm?

What can we learn from Africa’s reform successes and how can these reforms be preserved or deepened?

Reform success stories

17 high-growth countries: (4 oil exporters, 4 middle-income, and 9 LICs)

14 low-growth countries (12 of them fragile states)

13 medium-growth countries

Figures for Box 2.1.

-4

-2

0

2

4

6

8

10

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

(Simple 3-year moving average)

High-growth

Low-growth

Medium-growth

Sub-Saharan Africa:GDP per Capita Growth Rates

Source: IMF, World Economic Outlook

African success stories: Getting the critical basis right

Macroeconomic stability

Avoiding major policy failures

Reinforcing institutions

Proactive role of government

Higher aid

Fallout from the ongoing global crisis

2008 and Current Forecast for 2009

Source: IMF, African Department database

Sub-Saharan Africa: 2008 v. Current Forecast for 2009

Source: IMF, African Department database.

0

5

10

15

2008 Outcomes

Latest AFRprojections

for 2009

Real GDP growth(Percent)

Currentaccountbalance(Percentof GDP)

Fiscal balance(Percent of GDP)

Inflation(Percent)

-5

0-5 5 10 15-15 -10

-10

-15

All countries will be affected by the crisis, including some star performers

Source: IMF staff estimates

Impact of the Crisis on Growth in Sub-Saharan Africa 1

-15

-10

-5

0

5

10

15

-5 0 5 10 15

GDP growth, Average 1997-2007

GDP growth,2009 Proj.

(Percent of GDP)

How can the challenges be dealt with in the short-term?

Use available fiscal space

Where possible, ease monetary policy and let the exchange rate adjust to the external environment

Closely monitor financial vulnerabilities and be prepared to act promptly

Strengthen social safety nets

What are the implications of the crisis for structural reforms?

It is important now to move ahead with planned structural reforms in:

Public financial management

Social safety nets

Cost of doing business

Countries also need to avoid new restrictions on trade flows as they work to mitigate the impact of the global crisis.

Role of the state versus the private sector in a time of crisis?

Near-term More active aggregate demand policies Strengthening of financial sector surveillance

Medium-termLarger focus on improving supervisory and

regulatory environment Private sector as engine of growth

How can the internationalcommunity help?

African countries require the support of the international community to respond effectively to the global crisis.

The international community should endeavor to meet or exceed the G-8 Gleneagles commitments.

The Role of the IMF

The IMF is taking important steps to help African countries meet the challenges of the crisis:

Doubling concessional lending to low income countries

Working on a proposal to increase the general SDR allocation

Revising its lending instruments to make them more flexible

Continuing to provide policy advice and extensive technical assistance for strengthening economic policymaking in Africa