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De Rato pledges to help Africa boost growth, cut poverty, and improve health and education

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International Monetary Fund. External Relations Dept.
Published Date:
August 2004
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Information about Sub-Saharan Africa África subsahariana
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IMF Managing Director Rodrigo de Rato wrapped up his trip to Africa on August 6 in Uganda, promising that the IMF will help Africa sharply raise economic growth to attain the UN Millennium Development Goals. During his week-long visit, which included stops in Nigeria (see IMF Survey, August 9) and Gabon, he met with African leaders, parliamentarians, and representatives of civil society, and he visited an AIDS clinic in Gabon and an elementary school in Uganda—the main purpose being to listen and learn. He discussed issues ranging from increasing Africa’s voice and representation in the IMF to improving governance in the oil sector. At the end of the trip, Malawi’s President Bingu wa Mutharika told reporters that he and President Yoweri Museveni of Uganda and President Mwai Kibaki of Kenya “found the Managing Director very receptive, very responsive but also sympathetic to the problems we have.”

Before visiting Uganda, de Rato met with Gabon’s President El-Hadj Omar Bongo and other heads of state of the Central African Economic and Monetary Community (CEMAC) in Libreville. On August 4, he told a group of leaders there that the CEMAC region, in particular, would benefit from the recent rise in oil prices and a substantial expansion in production in some countries. “The key priority, supported by all leaders, is to harness the revenue from oil production for development and poverty alleviation,” de Rato said. “This will require continued sound macroeconomic policies, including fiscal policies that deal prudently with the windfall gains from current high oil prices.”

De Rato welcomed Gabon’s decision to adhere to the Extractive Industries Transparency Initiative, which aims to increase transparency of payments by companies and revenues to governments in the extractive industries. He also emphasized, in his conversations with many of the other African leaders, the need for more transparency of oil production (see box, this page).

De Rato said that Africa’s desire to accelerate regional integration “can play a substantial role in sustaining growth.” Establishing a truly unified regional market by eliminating all trade barriers between CEMAC members could help boost the region’s economic potential. But, he said, “it will be important to ensure that regional integration does not become inward-looking.”

At the same time, de Rato urged advanced countries to provide more and better coordinated development assistance, mostly in the form of grants, and to improve market access to their economies. The Doha trade round “is a critical opportunity to make a significant advance in multilateral trade liberalization that will truly benefit the poorest countries,” he said.

At the end of his visit to Gabon, de Rato told African leaders that “you can rest assured that the IMF will remain on your side, through continued policy advice, technical assistance, and, when appropriate, the provision of financial assistance—and also as an advocate of your cause within the international community.”

Brighter growth picture

In Entebbe, de Rato told a regional summit—including President Yoweri Museveni of Uganda, President Mwai Kibaki of Kenya, and President Mutarika—that sub-Saharan Africa could grow by more than 5 percent in 2005. This bright forecast was thanks to the global economic recovery, better macroeconomic stability in many countries, rising commodity prices, and a recovery in agricultural production following severe droughts in 2003. “Macroeconomic stabilization has borne fruit,” de Rato said. “Uganda and Tanzania, for example, are now reaping the benefits of sustained, sound policies and have seen economic growth rates averaging over 5 percent a year for the past five years.” But he warned that Africa still faced many risks, including “an unsteady policy environment.” And, although growth is improving, “even higher rates of growth are needed to make decisive advances in reducing poverty.”

De Rato called on African leaders to persevere with efforts to integrate their countries into the global economy. While there is “no single measure that can lift economic growth to the next level,” he said, there are some common building blocks that must be in place. These include reducing vulnerability and laying the foundation for reduced dependence on foreign assistance through sound macroeconomic policies; raising the productive capacity of the region’s economies, especially by promoting foreign direct investment; and creating more effective institutions that are able to enforce property rights and the rule of law.

How the IMF can help

As for the IMF, de Rato said the institution can and will do more to help its low-income members raise living standards and fight poverty. Replying to critics who charge that the IMF has forced governments to cut budgets, in the process squeezing outlays on health care, education, and other social programs, he said that “the IMF will ensure that its programs and policy advice are supportive of higher levels of aid, including for the fight against HIV/AIDS and for strengthening much-needed public infrastructure.”

De Rato noted that a new study by the Independent Evaluation Office of the IMF’s concessional loan facility for poor countries will help the institution decide how it can become more effective (see article, page 245). Work is also under way to assess the Heavily Indebted Poor Countries (HIPC) Initiative, which nongovernmental organizations have criticized for doing too little to reduce debt burdens. De Rato said he believed that “the dual objective must be to ensure effective debt relief in those countries where it has not yet been achieved while avoiding a further buildup of unsustainable debt in the future.” He also noted that the IMF was

  • making the IMF’s assistance more flexible to help countries emerge from conflict, deal with emergencies, and address future trade shocks;
  • providing additional relief to countries whose debt remains unsustainable by topping up existing debt relief;
  • supporting regional integration initiatives in Africa through better analysis and other assistance;
  • helping to improve aid flows by strengthening the IMF’s collaboration with the World Bank, other multilateral organizations, and donors; and
  • boosting the IMF’s internal effectiveness by restructuring its African Department, including by adding more staff and making management of that department more efficient.

De Rato said the IMF would help capacity building by opening three more regional technical assistance centers in Africa to supplement the ones in Mali and Tanzania.

Africa asks for greater say

After the summit, the three eastern African presidents released a statement saying that discussions with the IMF’s Managing Director had been very fruitful. They asked him to consider strengthening Africa’s relationship with the IMF by

  • introducing more flexibility in the relationship to ensure that “we are true partners in the development process;”
  • giving Africa more say in the design of IMF-supported economic programs, which “will enhance country ownership of the economic reform programs;”
  • being more open about mistakes. “When programs fail or do not work out as expected, countries have, in the past, taken all the blame. However, the IMF, of course, also makes mistakes;”
  • strengthening Africa’s voice and representation within the IMF. “The allocation of quotas should be reviewed to give Africa more representation,” and “more Africans should be given more senior positions of responsibility in the IMF”;
  • reviewing debt issues. Despite the HIPC Initiative, some countries are “sinking under a heavy debt burden.” The IMF should review its debt sustainability analysis to take into account alternative measures of debt sustainability. It should also develop a framework to analyze the domestic debt burden of many African countries (see also page 255);
  • making judicious use of the IMF’s influence. All IMF staff should “be careful and responsible in the way they pronounce themselves on country performance. Where there are differences of view, the IMF should not seek to isolate countries from development partners and investors”;
  • reducing transfers to the IMF. Some countries in the region are paying more money to the IMF than they are receiving in new loans and debt relief. The IMF should examine ways to alleviate this problem; and
  • relieving bottlenecks to growth and regional cooperation. The IMF should help find ways to finance infrastructure and support regional cooperation.

While in Gabon, de Rato met with heads of state and finance ministers from other Central African Economic and Monetary Community countries.

  • He discussed with Chad’s Minister of Finance, Ahmat Awat Sakine, the IMF’s concern about the humanitarian situation in Darfur in neighboring Sudan. In August, an IMF mission will visit Chad, which has experienced an influx of refugees from the region, to discuss a possible arrangement under the Poverty Reduction and Growth Facility (PRGF).
  • In his meeting with the Prime Minister of Cameroon, Peter Mafany Musonge, de Rato said the IMF recognized the country’s better growth and inflation performance and urged them to continue, including through strong fiscal management.
  • During his meeting with President Francois Bozize of the Central African Republic, the Managing Director praised the government’s efforts to address political instability, weak governance, and a difficult social and economic environment and said the IMF would assist the government in any way it could.
  • De Rato congratulated President Denis Sassou-Nguesso of the Republic of Congo for his efforts to increase the transparency of the oil sector. An IMF mission will visit Brazzaville in August to discuss the possibility of a PRGF program.
  • During his talks with President Fradique de Menezes of São Tomé and Príncipe, de Rato welcomed the decision to increase transparency in the oil sector, which he said would help improve the fiscal situation.

Laura Wallace

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