Minister Kenneth O. Matambo, Chairman of the African Caucus, and Christine Lagarde, Managing Director of the International Monetary Fund, co-chaired the African Consultative Group meeting yesterday at the IMF Headquarters and they issued the following statement after the conclusion of the Group’s meeting in Washington, USA
“We had very productive discussions on Africa’s economic prospects, focused on policy challenges and opportunities. Reflecting the difficult external economic environment, particularly related to continuing low commodity prices and security-related challenges, economic growth in Africa slowed in 2016 to its lowest level in two decades. However, there continues to be significant variation in economic performance across countries, with non-resource intensive countries, particularly in sub-Saharan Africa, continuing to grow robustly.
“We agreed that the medium-term outlook remains clouded. The external environment has improved somewhat, but significant downside risks and policy uncertainties remain. A possible faster-than-expected normalisation of monetary policy in the US could imply a sharp U.S dollar appreciation and further tightening of external financing conditions, as well as a higher external debt burden. Famine in Somalia, South Sudan, and possibly northeastern Nigeria, drought in eastern Africa, and pest and armyworm infestations in some southern African countries could also create food insecurity in about half of the countries in the region.
“Against this backdrop, we agreed that the policy adjustments needed to address the large macroeconomic imbalances faced by some of the countries hardest-hit by the commodity price fall and to contain emerging vulnerabilities in other countries, should not be delayed. Most oil exporters, particularly in Sub-Saharan Africa, continue to face the need for a large fiscal adjustment to reflect the permanently lower oil prices, and in countries with scope for exchange rate flexibility, the exchange rate should be allowed to absorb pressures, while eliminating exchange restrictions. Even for those countries that have continued to grow robustly, a gradual, growth-friendly fiscal consolidation may be required to address emerging vulnerabilities. More broadly, efforts to enhance domestic revenue mobilization, public financial management, and financial sector deepening while addressing long-standing weaknesses in the business climate will all support a resumption in stronger and more inclusive growth. Finally, we concurred that there is a need to develop a more integrated and well-targeted social safety net.”
