Speech

Capacity Building, Governance, and Economic Reform in Africa-- Remarks by Michel Camdessus

November 2, 1999

french

Mr. Chairman, Excellencies, Ladies, and Gentlemen:

It gives me great pleasure to welcome you to this inaugural seminar of the Joint Africa Institute (JAI). We are very honored to have so many distinguished guests from across Africa, including Prime Ministers, Ministers, and Central Bank Governors, join us today for this opening ceremony. I very much wish I could have been with you today, but previous commitments prevent me from doing so. However, as you can see, they do not prevent me from sharing some thoughts with you on this important occasion—thanks to the marvels of modern technology.

The inauguration of the JAI is a new milestone in the enhancement of economic and financial training opportunities in Africa. Three of Africa's key multilateral partners are joining together to bring the best of their training capabilities directly to the region. Let me extend heartfelt thanks to the Government of Côte d'Ivoire for agreeing to host the JAI in this beautiful country. I would also like to express my gratitude to the African Development Bank (AfDB) and the World Bank for their hard work and collaboration in bringing this Institute to life. African policymakers face a diversity of issues and challenges. Therefore we are delighted to be able to join the AfDB and the World Bank as our partners in this new enterprise. This partnership will allow the JAI to take full advantage of the expertise of each institution and provide in-depth, hands-on training in a broad range of subjects. I am confident that the JAI will make a significant contribution to the African countries in their ongoing efforts to build their capacity for financial and economic management.

The timing of this inauguration could not be better, taking place as it does in a context of renewed, if still cautious, optimism about the prospects for growth and development in sub-Saharan Africa. During 1995-98 real GDP growth averaged 4 percent per annum and, after a long period of decline, real per capita income grew by 1 percent per annum. Inflation is down from an average of 40 percent in the first half of the 1990s to 10 percent in 1998. External and fiscal positions of many African countries have strengthened substantially. The Fund's latest projections indicate a further improvement in the economic and financial indicators for the region for this year and the next, after the adverse impact of the downturn in commodity prices in 1998.

These encouraging results—a turnaround in macroeconomic performance, the greater resilience of many economies—are the consequence of the determined implementation of sound economic and financial policies and structural reforms in a number of African countries. We in the Fund, and I am sure the same can be said by the World Bank and the AfDB, are pleased to have been able to support these efforts through our concessional lending, complemented in several cases by the debt-reducing initiative for the heavily indebted poor countries (HIPC).

Although Africa's economic performance has improved and its outlook is positive, you know only too well of the tremendous efforts that are still needed. Per capita income growth is positive, but still too slow. Absolute income levels are still very low. And above all, poverty has reached unacceptable proportions. To begin to address these problems, I see challenges—for Africa and its partners—in three key areas.

• The first, most pressing, challenge is to undertake a concerted effort to reduce poverty, through new growth-oriented strategies;
• The second is to bring about an increase in domestic saving and stimulate private sector investment, including from abroad; and
• A third challenge is to enhance the productivity and competitiveness of economies, so that they can reap the full benefits from the ongoing globalization of the world economy.

These are indeed enormous challenges that confront Africa's policymakers. And it is they who have the primary responsibility for devising the strategies to alleviate poverty. But they are not alone. There is a heightened awareness of these issues in the international community, a willingness to support Africa's efforts to achieve high-quality growth. What does this involve?

African countries will need to be diligent in their pursuit of strong institutions and sound policies. Let me mention a few key components:

• Consolidating macroeconomic stability, a key requirement to bring about sustained increases in private saving and investment;
• Strengthening the financial sector, by developing markets, improving supervision and regulation, and opening financial sectors to both domestic and foreign competition;
• Strengthening governance, transparency, and accountability in the management of public and private resources; satisfactory development is not possible when corruption is rampant;
• Eliminating unproductive government spending, including excessive military expenditure, to create room—desperately needed—for increasing social expenditures;
• Improving regulatory and judicial frameworks and strengthening the judicial system and its independence and the impartiality of the state;
• Speeding up trade liberalization, to promote the efficiency and competitiveness of domestic producers and to foster a deepening of trade links, which will help Africa to integrate more fully with the world economy;
• Redressing the balance between private and public sectors by restructuring and privatizing public enterprises, and subjecting formerly state-owned companies to market-based competition; and
• Deepening initiatives for regional integration in the context of nondiscriminatory multilateral trade liberalization.

(Let me now shift to Shakespeare's language, albeit with the accent of Molière).

Many of these are well known-elements of sound policy packages, but increasingly we see that such policies must explicitly be cast in the context of a strategy to combat poverty. In short, reducing poverty must be a focal point in designing policies and financial support for development. How can the international community contribute?

In recent months, the international community has taken a significant step to alleviate the debt burden of the poorest and most heavily indebted countries by a substantial enhancement of the initiative for the HIPCs. It offers two innovations.

• It provides more extensive debt relief, to more countries and on a quicker path than was envisaged under the original initiative.
• It involves an explicit link between debt relief and poverty reduction, a response to widespread concern that excessive debt servicing obligations could undermine the provision of basic social services, especially to the poorest. Our goal is to help countries—as they undertake reform, as they stabilize their economies, and as they receive international assistance, including very highly concessional debt relief—to channel the benefits to where they are most desperately needed, reducing poverty.

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And on that note, let me turn to the contribution of the new Joint Africa Institute to deepening the understanding of these issues and developing the capacity to design and implement the appropriate policies. It will seek to develop the analytical and technical skills of country officials, disseminating the lessons of experience gained in other parts of the world, and providing a forum for discussion on important regional issues. The JAI will also offer a range of courses and seminars geared to the major policy issues facing African countries.

We begin with today's Inaugural Seminar on "Capacity Building, Governance, and Economic Reform in Africa", for which we are fortunate to have some very knowledgeable speakers from within and outside Africa.

The IMF's contribution to capacity building and improving governance focuses primarily on enhancing the management of public resources, in particular through greater transparency and accountability, and supporting a liberal and stable economic and regulatory environment. In its interaction with member countries, the IMF places high priority on the economic aspects of governance. By assisting the authorities in their efforts to reform the tax system, tax administration, budgetary procedures and financial management, we contribute to reducing the scope for bribery, corruption, and fraudulent activity. Technical assistance in the area of economic and financial data also enhances transparency. Further, the recent work to publish letters of intent and policy framework papers is important not only because it increases transparency and accountability, but it also promotes ownership of economic and financial policies.

Training provided by the IMF to country officials is an important tool in building capacity among our membership. Over the past few years, the IMF has been expanding its training program so as to reach a greater number of officials in member countries. The average number of African officials attending courses offered by the IMF Institute has increased substantially: on average, nearly 300 African officials per year attended our courses and seminars during 1996–99, compared to an average of about 160 participants per year over the 1991–95 period. And the demand looks set to continue at a very high level. We hope and expect to significantly enhance the Fund's capacity to address the training needs of African member countries through the JAI. In the coming year, the new Institute will provide training to about 400 additional African officials.

I would like to emphasize that even with the establishment of the JAI, the IMF Institute is committed to continuing its regional training activities in collaboration with the Central Bank of West African States (BCEAO), the Bank of Central African States (BEAC), the West African Institute for Financial and Economic Management (WAIFEM), and the Macroeconomic and Financial Management Institute (MEFMI).

During its first fourteen months of operation through end-2000, in addition to the inaugural seminar, the JAI will offer a total of 14 courses and seminars. These will cover a wide range of topics, including macroeconomic adjustment and structural reform, banking supervision, financial programming, public finance, privatization, financial sector issues, macroeconomic management, economic growth and poverty alleviation, governance for sustainability of economic development, rural development, and social protection. As you can see, several of these activities are directly relevant for poverty reduction. And reflecting the mandates of the three institutions, the courses will draw on the various areas of expertise of the World Bank, the IMF, and the AfDB. The program of the JAI will remain flexible and under constant review so that special courses and seminars can be organized on topical issues of direct relevance to the countries on an "as-needed" basis. We hope to expand the JAI's program over the coming years.

In closing, once again, I would like to express my appreciation to all of you for taking the time to join us today. I would also like to thank again the Government of Côte d'Ivoire and our colleagues at the African Development Bank and the World Bank for the spirit of innovation and collaboration that has marked the birth of this joint venture. I wish the JAI great success in its endeavors, and hope to visit it soon.