IMF paints gloomy pic­ture for Africa

Lesotho Times - - Business -

JO­HAN­NES­BURG — This year’s slump in com­mod­ity prices and the end of a flood of cheap dol­lars has pegged back African growth to its weak­est in six years and things could get worse if the global econ­omy con­tin­ues to floun­der, the IMF said on Tues­day.

In its lat­est African Eco­nomic Out­look, en­ti­tled “Deal­ing with the Gath­er­ing Clouds”, the Fund said the poor­est con­ti­nent was likely to grow 3.75 per­cent this year and 4.25 per­cent next, a big drop from the years be­fore and af­ter the 2008/2009 financial cri­sis.

“The strong growth mo­men­tum ev­i­dent in the re­gion in re­cent years has dis­si­pated,” the re­port said. “With the pos­si­bil­ity that the ex­ter­nal en­vi­ron­ment might turn even less favourable, risks to this out­look re­main on the down­side.”

Hard­est-hit have been sub-sa­hara’s eight oil ex­porters - led by top pro­duc­ers Nige­ria and An­gola - al­though oth­ers such as Ghana, Zam­bia and South Africa were also suf­fer­ing from weak min­er­als prices, power short­ages and dif­fi­cult fi­nanc­ing con­di­tions.

How­ever, the Fund noted some bright spots, most no­tably Ivory Coast, which is sched­uled to ex­pand as much as 9 per­cent this year due to an in­vest­ment boom that fol­lowed the end of a brief civil war in 2012.

This week­end’s over­whelm­ingly peace­ful elec­tion, which Pres­i­dent Alas­sane Ouat- tara — a former IMF of­fi­cial — is widely ex­pected to win, has re­in­forced hopes Fran­co­phone Africa’s big­gest econ­omy has put its worst years be­hind it.

With com­modi­ties rev­enues fore­cast to re­main de­pressed for sev­eral years, gov­ern­ments have to work quickly to di­ver­sify rev­enue sources by im­prov­ing do­mes­tic tax col­lec­tion, said An­toinette Sayeh, head of the IMF’S Africa depart­ment.

“Mo­bil­is­ing more rev­enues is an ur­gent mat­ter — as is be­ing more ex­act­ing in choos­ing ex­pen­di­ture,” she told Reuters. “It’s a dif­fi­cult patch, but we def­i­nitely think that coun­tries can move out of the very dif­fi­cult ter­rain and grow more ro­bustly.”

Pub­lic debt lev­els have been ris­ing, in part be­cause of ac­cess since 2007 to in­ter­na­tional cap­i­tal mar­kets, and Sayeh said gov­ern­ments needed to be “very care­ful” in how they man­aged dol­lar fi­nanc­ing to en­sure it is in­vested wisely.

Some gov­ern­ments, such as Ghana, have been ac­cused of frit­ter­ing away Eurobond rev­enues on state salaries. Sayeh said Ac­cra was do­ing “rea­son­ably well” in its ef­forts to curb pub­lic spend­ing un­der a $918 mil­lion IMF pro­gramme agreed in April.

Zam­bia, an­other coun­try strug­gling with the ris­ing cost of ser­vic­ing dol­lar debt af­ter a halv­ing in the value of its cur­rency this year, has so far cho­sen not to asked the IMF for financial as­sis­tance, Sayeh said.

“If Zam­bia feels that it can ben­e­fit from fund financial as­sis­tance, we stand ready to look at that,” she said.

— Reuters

Min­eral ex­port­ing coun­tries in africa are suf­fer­ing from lower com­mod­ity prices.

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