IMF warns Africa against challenges that could dampen robust outlook

The International Monetary Fund (IMF) has advised African countries to consciously build infrastructure, institutions, and people as a policy priority that would help stem those short and long term challenges that could dramatically affect the robust outlook for the continent.

Speaking at the Africa Rising Conference in Maputo, Mozambique on Thursday, Christine Lagarde, IMF managing director, acknowledged that Africa is indeed with high growth rates over the past decade and now a growing investment destination for both advanced and emerging economies—with a record $80 billion inflow expected this year.

“And yet, the tide of growth has not lifted all boats as poverty remains stuck at unacceptably high levels—still afflicting about 45 percent of the region’s households. Inequality remains high. And some countries still facing recurring internal conflict are struggling to exit from fragility,” she stressed.

She said the first priority should then be to build infrastructure and close the huge gap in energy, roads, and technology grids which, according to her, are the foundations of any strong and durable edifice.

She said over the past three decades, per capita output of electricity in sub-Saharan Africa remained virtually flat. Only 16 percent of all roads are paved, compared with 58 percent in South Asia as these shortfalls represent huge costs to businesses—and to people.

The second policy priority, according to her, is to build institutions, which means governance, transparency, and sound economic frameworks while the third is to build people—children, youth, workers, and in particular women.

The conference, organised by the government of Mozambique and the IMF is to take stock of Africa’s strong economic performance, its increased resilience to shocks, and the key ongoing economic policy challenges.

Lagarde said the Africa’s outlook for the region is very positive as the continent is expected to grow by about 5.5 percent this year and next, and the poorest countries even faster—close to 7 percent.

“But it must keep a firm eye on what’s going on beyond its horizons. Globally, even as the world turns the corner of the Great Recession, the recovery remains weak and uneven,” she warned.

According to her, the near-term worries for the continent include that fact that the region’s outlook could be clouded by three major issues including slower growth in advanced economies, and in particular emerging market economies which are major trading partners for Africa; lower prices for some commodities; and tightening external financial conditions and potentially increased market volatility as monetary policy is normalised.

In the longer-term, challenges, according to her, would include demographic challenges, technological challenges as well as environmental challenge issues.