Washington, DC: Mr. Olavo Correia, Cabo Verde's Vice Prime Minister and Minister of Finance and the First Vice Chair of the African Caucus and Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), recently co-chaired the African Consultative Group meeting on Tuesday, October 10, 2023.[1]They issued the following statement at the conclusion of the Group's meeting in Marrakech.
"We had very productive discussions on Africa's economic prospects. This year has been a difficult year for Africa. The region is still emerging from the COVID-19 pandemic and African countries have been hit by high borrowing costs ("funding squeeze") and a cost-of-living crisis. Several countries of the Group have experienced increased political instability and deteriorating security underscoring the need to address persistent fragility. Notwithstanding these challenges, recent data, and the outlook for 2024 provide hopeful signals that economic activity is gradually strengthening with stronger growth, falling inflation, and narrowing fiscal imbalance.
"Against this backdrop, the Group agreed that policy priorities to address these challenges should aim at solidifying the ongoing economic recovery, rebuilding buffers, and investing in the future to improve living standards. In countries with elevated and rising inflation, policy settings should be sufficiently tight to bring it down. The exchange rate, where appropriate, should be allowed to play its shock absorber role while mitigating second-round effects of depreciation. Fiscal policy should continue consolidating public finances and reducing debt sustainability risks while providing targeted social assistance to the most vulnerable. In resource intensive countries, investing in education, managing better resource-based wealth, accelerating diversification will help improve living standards.
"The Group underscored the need to scale up concessional financing, including to support climate change adaptation and mitigation. Large financing needs from infrastructure and social protection gaps are being exacerbated by climate change. While the African continent had a minor contribution to the stocks of greenhouse gases in the atmosphere, it is already bearing and is deemed to bear the largest costs from climate change. At the same time, fiscal space remains constrained as buffers have been depleted during the crisis. Private sector participation will also be essential to fill the funding gaps.
"The Group also agreed to enhance domestic resource mobilization. In this respect, identifying the international best practices and leveraging specific country experiences is important while enhancing governance and accountability. Efforts to strengthen countries' tax systems and to combating tax evasion and illicit financial flows should be accelerated.
"As in the past, the IMF remains actively engaged with the region and continues to work towards strengthening its financing capacity to support countries to navigate challenging times and build a resilient and prosperous future.
"To continue to meet the needs of low-income countries in the region, after successfully reaching the fundraising target, the IMF is initiating a comprehensive review of the Poverty Reduction and Growth Trust (PRGT) facilities and financing with the objectives of ensuring its long-term financial sustainability and meeting strong demand. In addition, achieving additional pledges to replenish the Fund's PRGT is also key to securing much-needed concessional resources and unifying access limits between the IMF general resource and the PRGT.
"The Resilience and Sustainability Trust (RST) is operational, providing longer-term affordable financing to address longer-term challenges, including climate change and pandemic preparedness. To date, six out of the eleven countries benefiting from the RST are in Africa. The Group welcomed the substantial progress made on RST fundraising and urged potential contributors to go beyond the original target to meet growing needs.
"Completing the 16th General Review of Quotas by end-2023 is vital to preserve the IMF's role at the center of the global financial safety net. Reaching an agreement on an increase in the overall size of the IMF's quota resources would reduce reliance on borrowed resources and strengthen the IMF as a truly quota-based institution. The membership is committed to continue the process of quota realignment towards developing economies. We call for the creation of a 25 th chair on the IMF Executive Board to be attributed to Sub-Saharan Africa to improve voice and representation at the IMF.
"Finally, the IMF will continue to strengthen the analytical underpinnings of its policy advice, provide significant capacity development to its African members to help preserve macroeconomic and financial stability and build economic resilience."
[1]The Fund Management meets with the full membership of the African Caucus (African finance ministers and central bank governors) at the time of the Annual Meetings.
