Commodities, Rainfall, Instability Biggest Challenges —African Ministers

IMF News, October 8, 2016

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Low commodity prices are adding to fiscal pressures across African countries.
Climate-related shocks (poor rains) are reducing power generation and agricultural output.
Political instability is causing large currency depreciations and surging inflation in affected countries.
Diversification of revenue sources (tourism, agriculture, regional integration and trade) is presented as a priority response.

South Sudan
- "Our currency has lost 80 percent since last year, and inflation reached 730 percent in August," said Stephen Dhieu Dau.
- The country is attempting to implement reforms and a peace agreement to end the civil war that started in 2013, but needs international support: "The international community participation to help our government and our reform agenda, I think is paramount."
Benin
- "Half of our revenues come from trade with Nigeria," said Romuald Wadagni.
- Benin is seeking to expand tourism and agriculture to diversify revenues, but is struggling with high debt and has begun discussions with the IMF about a possible program.
Guinea
- Malado Kaba reported progress supported by the IMF program: "So now our growth estimate is of 5.2 percent, we’ve been able to substantially reduce inflation to about 8.4 percent, and we have reconstituted our foreign reserves to three months of imports."
Zambia
- Zambia’s mining sector has been hit by copper prices that have "fallen by more than 40 percent."
- Climate-induced power shortages: "With poor rains, our power generation was down by 50 percent," said Felix Mutati.
- Mutati emphasized regional solutions: greater integration and trade to address the region’s problems.

Falling export revenues are generating large fiscal deficits and dampening growth prospects in the hardest hit countries.
Countries experiencing commodity price shocks and insecurity require fiscal adjustment and external support to stabilize economies.
Recovery and resilience examples (Guinea) are attributed to IMF-supported macroeconomic programs that helped restore growth, lower inflation, and rebuild reserves.

Implement reforms tied to peace agreements and stability to restore economic confidence (South Sudan).
Seek international community participation and support for reform agendas and stabilization (South Sudan).
Diversify revenue sources away from single-neighbor dependence and commodity reliance (Benin: tourism and agriculture).
Engage with IMF programs where appropriate to support macroeconomic stabilization and reserve rebuilding (Benin discussions; Guinea program support).
Promote greater regional integration and trade as pathways for recovery and resilience (Zambia).

IMF News — October 8, 2016