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IMF urge economic policies to boost growth in Sub-Saharan Africa

NAIROBI (Xinhua) -- The International Monetary Fund (IMF) has called for prudent economic policies to help boost growth in Sub-Saharan Africa.

In its October 2015 Regional Economic Outlook for Sub-Saharan Africa received on Thursday, the lender said economic activity in the region has weakened markedly although growth remains stronger than in many other regions, with growth expected at 3.75 per cent in 2015 and 4.25 per cent in 2016.

Antoinette Sayeh, Director of the IMF’s African Department, said this overall difficult picture masks considerable variation across the region.

"In most low-income countries, growth is holding up, supported by ongoing infrastructure investment and solid private consumption.

"But even within this group, some countries are feeling the pinch from lower prices for their main commodity exports, even as lower oil prices ease their energy import bill," Sayeh said.

"Even more hard hit are the region’s oil exporters, including Nigeria and Angola, as falling export incomes and resulting sharp fiscal adjustments are taking a toll on activity," she added.

In the Outlook for Sub-Saharan Africa, titled Dealing with the Gathering Clouds, the IMF attributed the slowdown to the combination of the sharp fall of commodity prices and more difficult financing conditions.

Sayeh said several middle-income countries, such as Ghana, South Africa, and Zambia, are also facing unfavorable conditions, including weak commodity prices, difficult financing conditions, and electricity shortages.

Moreover, a number of countries in the region are facing these circumstances with more limited external and fiscal buffers than they did at the time of the global financial crisis, the IMF official said.

She added that policies need to adjust to this new environment, adding that the sharp and seemingly enduring decline in oil prices makes adjustment unavoidable, and while some had space to draw on buffers or borrow to smooth the adjustment, that space is becoming increasingly limited.

"For most other countries, fiscal policy needs to strike an appropriate balance between debt sustainability considerations, on the one hand, and addressing development needs, on the other," Sayeh said.

Sayeh said it will also be essential to build on recent progress and continue to strengthen domestic revenue mobilization as much-needed additional resources to finance investments in the region’s future.

"Reducing inequalities, through carefully designed fiscal and financial sector policies and the removal of gender-based legal restrictions, could deliver significant growth dividends," she added.

On the monetary front, the IMF noted that wherever the terms-of-trade declines have been significant and the exchange rate is not pegged, it is important to allow exchange rate depreciation to absorb the shock.

"Even in those countries that are not heavily reliant on commodity exports and have seen their currency come under pressure, resisting them risks losing scarce reserves," the report says.

According to IMF, countries such as Cote d’Ivoire, Ethiopia, and Tanzania are expected to grow at 7 percent or more this year and next.

Other low-income countries, however are feeling the pinch from commodity prices, even though cheaper oil has eased their energy import bill.

Hardest hit are the region’s oil exporters as falling oil prices have drastically reduced export revenue and forced a sharp fiscal adjustment.

The oil producers account for about half of the region’s GDP and include the largest producers, Nigeria and Angola.

Several middle-income countries, including Ghana, South Africa, and Zambia, are also facing unfavorable conditions, ranging from weak commodity prices to difficult financing conditions and electricity shortages.

Accordingly, interventions should be limited to responding to disorderly movements of the exchange rate, the IMF said.

Monetary policy should only respond to second-round effects, if any, of exchange rate pass-through and other upward shocks to inflation, and risks to the financial sector from commodity price declines and exchange rate depreciation will need to be carefully monitored.

"In this environment, efforts to diversify growth away from extractive industries take on renewed importance.

"The rapid growth of the last decade has masked deteriorating trends in competitiveness, especially among commodity exporters," Sayeh said.

"To nurture new sources of growth and create sufficient jobs for the region’s growing population of young people, policy actions need to be geared toward boosting competitiveness, via progress on the business environment, infrastructure, and education."


UN official ask Africa to change policy, curriculum to end food insecurity

NAIROBI (Xinhua) -- The UN has called on African governments to act urgently to change how business and wealth can be created in the agricultural value chain.

Richard Munang, Coordinator for Africa Regional Climate Change Program, said that the continent needs to revolutionarily overhaul agricultural policy and incorporate youths in the sector to be able to manage farming as a business as opposed to a social venture.

"The 65 percent of arable land is capable of improving food security as well as creating employment for the 60 percent unemployed youths once the policies are changed to suit youth’s involvement in agriculture," Munang told a forum in Nairobi.

In Africa, most country’s constitution do not allow youths and women access to title deeds hence denying them an opportunity to seek financial services from banking institutions.

He noted that the continent also need to strengthen knowledge management, through capacity building, reinforce economic incentives and also engage private sector in agriculture to help increase productivity.

Munnag told universities to change their curriculum and include vocational training to promote agricultural practice amongst college leavers.

He noted that 17 million youths can be employed yearly in the agricultural sector once proper marketing and lending institutions are engaged.

"The business opportunities presented by the changing climate especially to Africa could be enormous," Munang added.

He observed that urgent steps need to be taken to tap into this hidden fortune especially in the agricultural sector which employs more than 60 percent of the labor force in the continent with contribution of up to about 32 percent of the Gross Domestic Product (GDP).

The Director of Institute of Development Studies at the University of Nairobi (UoN) Professor Winnie Mitulla called for a partnership between academia and private sector in disseminating research to the public.

"The current food insecurity requires that partnerships are promoted as way of reducing hunger and malnutrition in the continent," she added.

Participants at the meeting called for creation of linkages to enable farmers sell their produce easily within the continent as opposed to exports when the continent needs additional food.

They further observed that air transport within the continent need to be liberalized and abandon usage of visas to help promote intra-Africa trade.

Rwanda drops seven places in World Bank’s "Doing Business" rankings

KIGALI Rwanda (Xinhua) -- The World Bank’s "Doing Business" report for 2016, released on Tuesday ranked Rwanda 62nd out of 189 countries in the world, making it seven places down compared to last year’s 55th position.

The country is still ranked among the best economies in the world in getting credit at the 2nd position globally and registering property at 12th.

According to the report, Rwanda has been ranked the second easiest place to do business in Africa after Mauritius.

The economic giant on the continent, South Africa, comes third.

Rwanda is the top business friendly destination in East Africa, and the 7th top reformer globally according to the World Bank rankings.

It leads all the East African countries followed by Kenya in ease of doing business.

Launched in 2002, Doing Business report looks at domestic small and medium size companies and measures the regulations applying to them through their life cycle.

According to Claire Akamanzi, chief operating officer Rwanda Development Board, Rwanda implemented a credit scoring service, supporting banks and financial institutions to assess creditworthiness which he said made the country one of the best economies in the world in getting credit.

The small central African nation has demonstrated consistent strong performance in the World Bank Doing Business Rankings in recent years.

A new investment law, launched in July, seeks to bring foreign direct investments (FDIs) worth 1.12 billion U.S dollars by the end of the year.

Figures from Rwanda Development Board (RDB) put the country’s actual FDIs at 257 million U.S dollars in 2013 and 521 million U.S dollars in 2014.



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