Press Release No. 10/170

Press Release: African Consultative Group Meeting: Statement by the Chairman of the African Caucus and the Managing Director of the IMF

April 25, 2010

Mr. Samura Kamara, Minister of Finance of Sierra Leone and Chairman of the African Caucus, and Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), co-chairs of the African Consultative Group, issued the following statement today after the conclusion of the Group’s meeting, which was held at IMF headquarters:

“We discussed the impact of the global economic crisis on Africa. Economic growth dropped sharply in 2009, averaging only 2 percent in sub-Saharan Africa. We agreed that in 2010, prospects for the region are for a recovery that is increasing in strength, in tandem with the world economy, and economic growth could rebound to 4¾ percent.

“Noting that low levels of physical capital remain key constraints on economic diversification and sustained growth in many sub-Saharan African countries, we discussed the scaling up of public investment as a strategy for regaining and sustaining high rates of growth in the post-crisis period. We observed that the region’s public investment rose as a ratio to GDP throughout the economic crisis, helped by the pursuit of countercyclical policies. Nevertheless, despite such gains, infrastructure in SSA remains underdeveloped, impairing competitiveness, discouraging private investment and constraining growth potential.

“The Managing Director acknowledged the importance of public investment in helping to meet Africa’s development goals and the IMF’s commitment to supporting its members’ poverty reduction and growth enhancement goals. He noted that the Fund had increased its financial support to SSA five-fold in 2009, and that the IMF’s new lending instruments provide greater flexibility and higher levels of concessionality. He also added that the IMF’s new policy on nonconcessional borrowing provided member countries with added flexibility for addressing critical financing needs, including for public investment.

“We identified key factors that have served as binding constraints on public investment’s ability to boost growth—namely, planning capabilities, debt sustainability, efficiency, investment phasing, and absorptive capacity. We agreed on the need to determine a stable medium-term investment spending path that is consistent with a sustainable fiscal balance. In so doing, spending plans should fully account for the recurrent cost implications of scaled up investments. We also agreed that any borrowing for public investment should be consistent with debt sustainability considerations.