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Africa needs strong policies to tap into potential, says IMF

Apr 24 2017 19:27
Malcom Sharara

Harare - Sub-Saharan Africa is a region of tremendous potential and will be able to tap into this potential in the coming years, according to the International Monetary Fund.

Speaking at a press conference over the weekend, IMF African Department director Abebe Aemro Selassie however said reaping this potential requires strong and sound domestic policy measures.

He said sub-Saharan Africa needs to prioritise three issues to foster stronger and durable economic growth.

Macroeconomic stability

Selassie said the first priority is renewed focus on macroeconomic stability.

"This we think is the prerequisite to realise the tremendous potential that the region has," he said, adding that for the hardest hit multi exporters, fiscal consolidation will be very important with a strong emphasis on revenue mobilisation.

"Elsewhere exchange rate flexibility is another issue. Wherever there is scope for exchange rate flexibility, I think that flexibility has to be used, including by eliminating the exchange restriction to help absorb the shocks that these countries are subject to."

He added that higher revenue mobilisation is needed to safeguard debt sustainability while investment spending needs to be more efficient.

Structural reforms

Selassie said the second priority should be structural reforms to help support macroeconomic rebalancing.

“This includes reforms like revenue mobilisation with a focus on shifting away from relying on commodity-related revenues and debt financing to more robust sorts of tax revenue,” he said.

Economic diversification

“Finally, policies to foster economic diversification will be very important in the coming years, again with a view to moving countries away from commodity dependence where that is the case.”

Selassie said another important area of focus, particularly at this juncture, is strengthening social protection mechanisms to help alleviate the impact of the current slowdown on the most vulnerable groups.

“Existing social protection programmes in the region are often fragmented, not particularly well targeted, and generally cover a very small share of the population.

“We see tremendous scope to better target these programmes and use the savings from aggressive spending on other parts of the budget to better target these resources to help vulnerable groups,” he said.

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imf  |  sub-saharan africa  |  africa economy
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