African Consultative Group Meeting: Statement by the Chairman of the African Caucus and the Managing Director of the IMF
Mr.Abdoulaye Bio-Tchané, Chairman of the African Caucus, and Ms.Christine Lagarde, Managing Director of the International Monetary Fund (IMF), co-chaired the African Consultative Group meeting today at the IMF Headquarters. They issued the following statement after the conclusion of the Group's meeting in Washington.
“We had very productive discussions on Africa's economic prospects, highlighting the near-term policy challenges as well as the continued opportunities. Reflecting the more difficult external economic environment and, in particular, the sharp drop in commodity prices, and tighter financial conditions, growth in Africa is projected to decline to about 3percent in2016, the lowest level in a long while. However, there is significant variation in growth performance across countries, with low-income countries in sub-Saharan Africa continuing to grow by over 5 ½percent.”
“We concurred that the decline in commodity prices is likely to be long lasting, as the causes seem structural rather than temporary–including the ongoing rebalancing of demand in China and, in the case of oil, technological innovation that has enhanced supply. We also recognized that non-economic shocks such as weather- and security-related challenges, are posing downside risks to Africa's economic prospects.”
“Against this backdrop, we agreed that prompt fiscal adjustment is needed to safeguard macroeconomic stability and rebuild policy buffers across the region, especially in oil-exporting countries. We also concurred that, in pursuing these consolidation efforts, country authorities should aim at protecting priority expenditures, such as social expenditures and well-prioritized and efficient infrastructure spending, with a view to ensuring that longer term development goals remain achievable. Furthermore, we agreed that, where feasible, the exchange rate should be allowed to adjust as needed to absorb shocks and improve competitiveness, with central banks' interventions limited to mitigating disorderly market movements.
“Beyond immediate policy reactions, we agreed on the need to reinvigorate the economic diversification agenda. Stepped-up structural reforms to improve the business environment as well as labor and financial markets and opening to trade are critical for boosting economic prospects, creating jobs, and improving living standards.”
Mr.Abdoulaye Bio-Tchané noted that “it is indispensable for African countries to adapt policies to the new environment and use all tools at their disposal–fiscal, monetary, exchange rate and structural policies to preserve hard-won macroeconomic stability, contain social impact, further strengthen our economies' resilience to shocks, and support growth. As public investments have helped greatly in preserving positive growth in a very challenging period, it is particularly essential to not slow abruptly the economic dynamism impulse by public and private investment. In this context, African countries look to the Fund not only to continue its effective engagement with Africa, but also to adapt its instruments and financial support to the magnitude of the shocks experienced by African countries. One avenue would be to increase access to the general resources of the Fund for low-income countries. Going forward, as countries seek to achieve the Sustainable Development Goals, we agreed that it will be important for governments to maintain macroeconomic stability, strengthen institutions and the business environment, address critical infrastructure gaps, expand access to financial services in our economies, and seek to ensure that growth is both broad-based and inclusive.”
Ms.Lagarde stated that “as in the past, the IMF will remain closely engaged with its African members. Appropriate policies will be key to weathering this difficult time and to maintaining a strong foundation for sustainable growth and poverty reduction. The Fund's support can take several forms, depending on countries' needs: policy advice, technical assistance and capacity development, and–where appropriate and needed–financial assistance. The IMF will continue to strengthen the analytical underpinnings of its policy advice and instruments and seek to adapt to meet the evolving needs of the membership”.
The African Consultative Group comprises the Fund Governors of a subset of 15 African countries belonging to the African Caucus (African finance ministers and central bank governors) and Fund management. It was formed in 2007 to enhance the IMF's policy dialogue with the African Caucus. The Group meets at the time of the Spring Meetings, while Fund Management meets with the full membership of the African Caucus at the time of the Annual Meetings.