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Sub-Saharan Africa growth is estimated to rebound at 3.2 per cent in 2021, 0.2 percentage points higher from October forecast, according to the IMF&#8217;s latest economic outlook. How did EAC economies perform?

IMF: SSA economies projected to rebound by 3.2% in 2021

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Abebe Aemro Selassie, Director of African Department at the International Monetary Fund (IMF) had a conversation on investment and sustainable debt here on the continent. He joins CNBC Africa&#8217;s Arnold Kwizera for more.

IMF’s Abebe Aemro Selassie on investment and sustainable debt management in Africa

After almost two decades of robust growth, there has been a sharp deceleration in economic activity in Sub-Saharan Africa. Lower commodity prices but also mounting imbalances in some of the region’s largest economies have taken average growth for the whole region down to 1.5% in 2016. A slight increase to around 2.5% is expected this year — markedly lower than the 5-6% of earlier years.
Sub-Saharan Africa: real GDP growth, 2016
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The full picture is more complex: since 2014, oil exporters, including Nigeria and Angola, have experienced substantial declines in growth leading to large revenue losses and balance-of-payments pressures. Conditions in many other resource-intensive countries, including South Africa, have also remained difficult. At the same time, most countries that are not resource-intensive — such as Côte d’Ivoire, Kenya or Senegal — continue to grow robustly. But, even in these faster growing countries, vulnerabilities are building.
Sub-Saharan Africa: real GDP growth, 2000–14 vs. 2015–16
So how can the growth engine in Sub-Saharan African be restarted? In the spirit of the Ghanaian Akan Sankofa bird, we should draw on the past to chart the way forward.
FOR MORE WEF AFRICA CONTENT READ:
<a href="http://cnbc.africa/category/insights/world-economic-forum/wef-africa-2017/">WEF AFRICA 2017</a>
Looking back at the period from 1950–2016, Sub-Saharan African countries have not had any trouble getting growth going. Furthermore, since 2000, in contrast to other developing economies, countries in the region have experienced less volatile growth and fewer growth decelerations (“down-breaks”), while still enjoying numerous growth accelerations
(“up-breaks”).
Likewise, sustained periods of growth (“growth spells”) have been common in Sub-Saharan Africa. The region has recorded about 40 growth spells between 1950 and 2016 — a record that is in line with other regions. What’s more, growth spells in Sub-Saharan Africa became more frequent after 1995. This reflects improvements in the business and macroeconomic environment, increased trade integration, and a generally supportive global environment with high commodity prices and accommodating financial conditions. This good performance was spread throughout the region — in both resource-intensive countries and countries that are not resource-intensive — providing an opportunity to lift living conditions across the continent.
Sub-Saharan Africa: growth spells, 1960–94, and 1995–2016
Getting growth started is one thing, keeping it going is another. Our work shows that compared with other regions, growth spells tend to be shorter and more often end in a ‘hard landings’ with economies lapsing into recession. This result still holds after controlling for the incidence of armed and political conflicts.
To understand these findings, we looked into the factors that underpin durable and sustained growth episodes. We found that the key driving factors are a supportive external environment and the right economic policies and institutions. But how important are these factors and policies in prolonging growth spells? As it turns out, they matter a lot. Starting from the median value in Sub-Saharan Africa, an improvement in macroeconomic variables or institutions by 25 percentile points increases the typical length of a growth spell by one to eight years. Those additional years of growth provide significant opportunities to further raise living standards.
All in all, Sub-Saharan African countries are good at getting growth going; there have been many more growth spells of late; and sustaining growth requires getting domestic policy right. So, what concrete actions are needed at the current juncture?
<ul>
<li>In those countries where significant macroeconomic imbalances have emerged, the reform priorities are: reducing fiscal deficits through stronger domestic revenue mobilization; better prioritization of spending on key infrastructure projects and social protection; and, where the monetary regime allows for it, greater exchange rate flexibility to foster competition and economic diversification.</li>
<li>In countries where growth remains buoyant, it is important to avoid an unsustainable increase in public debt while they are still in a position of strength. Here too, greater revenue mobilization offers the best route to maintain fiscal space for the many development spending objectives countries have.</li>
<li>For all countries in the region, complementing macroeconomic policy reforms with reforms to unlock growth potential is critical. These efforts include: strengthening the macro-structural policies that support investment and economic diversification; facilitating the adoption of technology; and promoting openness and integration with the global economy.</li>
</ul>
Now is the time to take steps to adjust policies to ensure macro-stability so the region can move beyond its current rough patch and expedite growth in the medium-term.
This article was supplied to CNBC Africa by WEF Africa. Watch our coverage from 3-5 May 2017

Op-ed:  Drawing on the past to chart the future: how Sub-Saharan Africa can become a driver for economic growth once again

MacDonald Dzirutwe | HARARE
Zimbabwe&#8217;s &#8220;bond note&#8221; surrogate currency will not solve its economic problems, the International Monetary Fund said, adding that only comprehensive reforms would address a fiscal crisis.
The southern African nation last year introduced bond notes, which officially trade at par with the U.S. dollar and are backed by a $200 million bond from the African Export and Import Bank.
http://cnbc.africa/news/2016/11/01/mugabe-decrees-regulations-paving-way-for-bond-notes/
The director of the IMF&#8217;s Africa department, Abebe Aemro Selassie, told reporters in Washington on Sunday that limited foreign exchange inflows and a lack of monetary policy tools since Zimbabwe&#8217;s adoption of the U.S. dollar in 2009 had worsened cash shortages.
&#8220;We think that, going down this one (bond) note route, in and of itself, will not address the challenges that the country has,&#8221; Selassie said, according to a transcript of the media briefing.
&#8220;So, it&#8217;s very important to have a more comprehensive policy package which also addresses a lot of the fiscal challenges that the country faces, a lot of the structural reforms that have to be done.&#8221;
The central bank says it has so far printed $121 million in bond notes but a high demand for cash has meant that the surrogate currency is also in short supply.
Importers, including mining companies and manufacturers, say they are facing serious delays in paying for imports because banks have no dollars to make the payments.
&#8220;So, it&#8217;s, again, more of a holistic package of reforms that are required to get Zimbabwe out of the place it&#8217;s in right now,&#8221; Selassie said.
(Reporting by MacDonald Dzirutwe; Editing by Olivia Kumwenda-Mtambo and Andrew Roche)

IMF says bond note cannot solve Zimbabwe’s economic problems

Abebe Aemro Selassie was appointed as the African Department Director of the International Monetary Fund﻿ (IMF) in 2016. He reflects on his vision for the IMF in Africa, the challenges of the continent, why Sub-Saharan Africa has immense economical potential and finally gives advice to those who may want to emulate such a public career.
Q: Upon your appointment, [the Managing Director of the IMF Christine] Lagarde said the “IMF remains deeply committed to serving our members in Africa”. Tell me [about] the role of the IMF in Africa.
Aemro Selassie: Sub-Saharan Africa remains a region of great importance for the IMF. We work closely with the authorities in the region as they address their development challenges and promote strong, durable and inclusive growth. Our support takes the form of policy advice, financial support (where needed), and capacity development.
As elsewhere, the IMF maintains a close policy dialogue with all its members in Sub-Saharan Africa on broad macroeconomic issues, such fiscal and monetary policies, inflation, or balance-of-payments developments. Of course, we adapt our advice to each country’s specific circumstances, including for countries in the region on ways to foster sustainable growth that benefits the entire population and gradually improves standards of living.
The Fund also provides financial assistance, mostly on concessional terms, when financing needs arise. This is typically in the context of an economic programme geared at achieving macroeconomic stability and fostering economic resilience. At present, 18 countries in the region have such programmes, with access to a total amount of over US$4.5 billion in balance of payments support from the IMF. Fund programmes also play a catalytic role in mobilizing financial assistance from other international financial institutions or bilateral donors.
One aspect of our work with the authorities in the region that is not well known—but is nonetheless of critical importance—is technical assistance and training. There, our experts provide recommendations in very specific areas to improve the impact and implementation of economic decisions. This covers a wide range of topics, from, for example, helping draft new tax laws, to training civil servants, or reforming policy frameworks.
Last year [2015], Sub-Saharan Africa received the largest share, about 40 percent, of all technical assistance provided by the IMF across the globe. Increasingly, it is being provided through the five technical assistance centres located in the region. Through these efforts, the IMF is helping African countries build administrative and governance capacity in areas such as public expenditure management, revenue mobilisation, and monetary and exchange rate policy
Q: You are described as someone that can bring a “unique blend of extensive knowledge and experiences” to your new role. You are known to have a wide array of experience in the private and public sector. Tell me about yourself?
Aemro Selassie: Early in my career, I did a stint in the private sector working on sovereign credit risk issues for the Economist Intelligence Unit. Following this, in 1992 I moved back to Addis Ababa to work as an adviser in the Office of the President for a few years, an experience I found greatly enriching and gratifying.
In late 1994, I joined the IMF where, over the years, I have had the opportunity to work on a wide-range of countries and assignments. To give you a flavour, the countries I have worked on directly include Kenya, Mauritius, Estonia, Iran, Poland, Romania, Thailand, and Turkey. Later, I was mission chief for South Africa and, most recently, Portugal during the Eurozone crisis. I also was the Fund’s Senior Resident Representative in Uganda between 2006 and 2009, an assignment that I enjoyed immensely.
In addition to country work, I have also always been attracted by policy and programme design issues and worked on those quite a bit. And I always enjoyed research, in particular when it is geared towards informing policy advice, for example during my time as the Head of the African Department’s Regional Studies Division.
Q: What do you think are some of the challenges of the continent and how is the IMF helping to tackle them?
Aemro Selassie: Many countries in sub-Saharan Africa are facing very difficult challenges at the moment. In fact, after a decade and a half of very robust growth, economic momentum in the region has weakened markedly, and growth this [2016] year looks set to slow to its lowest level in more than 20 years, at 1½ percent, well below population growth.
Two broad factors help explain this deceleration. First, the external environment facing many of the region’s countries has deteriorated, notably with commodity prices at multi-year lows and financing conditions markedly tighter. But, as importantly, the policy response in many of the countries most affected by these shocks has been much delayed and incomplete, raising uncertainty, deterring private investment and stifling new sources of growth.
This aggregate picture, however, masks considerable heterogeneity, and the full picture is more one of multi-speed growth. Commodity exporters, in particular oil exporters are under a severe economic strain, including the region’s three largest countries, Angola, Nigeria, and South Africa. But it is also important to keep in mind that most of the countries that do not rely substantially on commodities for their export earnings—about half of the countries in the region—perform well, as low oil prices, an improved business environment, and strong infrastructure investment continue to support their strong growth momentum. This group includes the likes of Côte d’Ivoire, Ethiopia, Senegal, and Tanzania where economic output is set to expand by six percent or more this year [2016].
Q: What are some of the policy reforms needed to address these challenges?
Aemro Selassie: The hardest-hit countries, especially oil exporters, need to act promptly as the adverse external environment is set to endure and their buffers have been exhausted. In these countries, a growth rebound will require strong economic reforms to re-establish macroeconomic stability. This implies fully allowing the exchange rate to absorb external pressures in countries outside monetary unions (such as Angola and Nigeria), coupled with strong and orderly fiscal consolidation, and a tighter monetary policy stance focused on containing inflation. For countries within monetary unions (such as oil exporters in the Central African Economic and monetary Community (CEMAC)), the fiscal reforms required to deal with the shock are likely to be considerably greater still and central bank financing of excessive fiscal deficits should be sharply curtailed to safeguard the credibility of their currency arrangements.
A few words are also in order about the countries in the region that are continuing to sustain strong growth. In many cases, despite the strong growth outcomes of recent years, fiscal deficits have been widening and debt levels have started to increase. To a large extent, this reflects stepped-up development spending. While policy action is not as urgent as for the hardest-hit countries, here too, with few exceptions, there is a need to strike a better balance between increased investment spending needs and debt sustainability considerations. In this respect, reforms to increase revenue mobilization would be particularly helpful.
Meanwhile, the IMF stands ready to provide financial support to countries in the region that request it. Indeed, if accompanying reforms are anchored in a credible medium-term framework and supported by that type of concessional financing, the pace of adjustment can be made more gradual attenuating the near-term growth impact significantly.
Let me end by saying that Sub-Saharan Africa remains a region of immense economic potential. But in some cases, this potential is being stymied by elevated macroeconomic imbalances and rising policy uncertainty. Addressing this challenge promptly and forcefully will be very important in the coming months.
Q: You were the head of the effort of the IMF during the Ebola epidemic in West Africa. What were some of the highlights?
Aemro Selassie: Time was of the essence in responding to the Ebola outbreak. As the severity of the Ebola outbreak became apparent in July/August 2015, we worked with the governments of Guinea, Liberia, and Sierra Leone to quickly assess the macroeconomic implications and the required policy response. It made sense for countries to expand their budget deficits to fight the outbreak.
And given these countries’ limited access to market financing, we also needed to help address the large financing gaps that they faced. Under expedited procedures, the Fund moved quickly to provide US$130 million zero-interest financing as early as September 2014 to the three affected countries. This was followed with a further US$160 million zero interest financing in early 2015. In addition, we granted the three countries a further US$100 million in debt relief.
The IMF is generally only associated with austerity policies. I think the work we did in Guinea, Liberia and Sierra Leone showed us moving very rapidly to support our member countries in their hour of need.
Q: To a young African who is intent on a career in public service such as yours, what advise do you have for them?
Aemro Selassie: I am not sure how well-suited I am to answer this question. In many ways, I have had the good fortune of being given the opportunity to work with great people, from whom I learned much.
The one thing that I did do, and which possibly helped at the margin, is to read a lot. I have always loved reading, a habit that I am very grateful to my mother for helping me sustain when I was very young. Growing up in Ethiopia in the late 1970s and early 1980s, books were very expensive and difficult to get hold off. She would buy me as many books as were available and I also did whatever I could to find some on my own—sometimes stuff that was way too complex for a 12-13 year-old (a battered copy of Das Kapital, for example). This love of reading has luckily stayed with me and allows me to broaden my thinking and cultural perspectives.﻿
*<a style="font-family: 'Noto Serif', serif; font-size: 2em; font-weight: bold;" href="https://twitter.com/GetachewS" class="ProfileHeaderCard-nameLink u-textInheritColor js-nav">Samuel Getachew</a> is an Ethiopian &#8211; Canadian. Based in Addis Ababa, Ethiopia and is currently with Addis Fortune newspaper.

Abebe Aemro Selassie

IMF: SSA economies projected to rebound by 3.2% in 2021

IMF’s Abebe Aemro Selassie on investment and sustainable debt management in Africa

Op-ed: Drawing on the past to chart the future: how Sub-Saharan Africa can become a driver for economic growth once again

IMF says bond note cannot solve Zimbabwe’s economic problems

IMF's African Department Director Abebe Aemro Selassie's vision for Africa

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Abebe Aemro Selassie

IMF: SSA economies projected to rebound by 3.2% in 2021

IMF’s Abebe Aemro Selassie on investment and sustainable debt management in Africa

Op-ed: Drawing on the past to chart the future: how Sub-Saharan Africa can become a driver for economic growth once again

IMF says bond note cannot solve Zimbabwe’s economic problems

IMF's African Department Director Abebe Aemro Selassie's vision for Africa

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Advertise With Us

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