Speech

Modernizing Monetary Policy in Sub-Saharan Africa High-Level Conference

February 28, 2022

Dear Governors, Distinguished Professors, Dear participants, and colleagues. Greetings. I hope you and your loved ones are safe from the COVID-19 pandemic. The Fund continues to work hard to ensure our region gets the vaccines needed to protect the populations and root out this disease. Again, let us remember “the pandemic is not over anywhere until it is over everywhere”. 

I am pleased to welcome you to this high-level conference on “Modernizing Monetary Policy Frameworks in Sub-Saharan Africa”.

This is an important and timely conference to take stock of the progress made by central banks in Sub-Saharan Africa. And this progress is impressive! Over the last three decades preceding the COVID-19 pandemic, the region’s average inflation declined by about 30 percentage points. In the mid-90s, up to 30 countries in the region had double digit inflation. In 2019, the region counted only 6 such countries, and most of them were grappling with conflict or a natural disaster. This improvement in price stability contributed to less volatile economic outcomes, higher growth, and better living conditions for the region’s populations. It is also an important factor behind the foreign direct investment flowing to the region to develop its potential. This progress has been achieved thanks to the commitment and dedication of many who are in the room today. Let me pause here as I remember our friends and colleagues, Governor Bennu Ndulu and Governor Tumusiime-Mutebile, whom we lost amidst the pandemic. We are grateful for their contributions.    

The commitment of sub-Saharan African policymakers showed in the courageous reforms they undertook. These reforms aimed for more price-based monetary policy frameworks and more flexibility in exchange rate regimes. They were combined with bold moves on governance to make central banks more independent and accountable. The result was a drastic reduction in monetary financing of deficits and in most countries in the region. The governance reforms enabled more transparency and improved communication of central banks’ assessments of the economic outlook and the rationale of their policy choices. These reforms helped bolster the credibility of the region’s monetary institutions and explain a great deal of the achievements on price stability. . This credibility will be crucial in the coming months as central banks grapple with inflationary pressures from the effects of the relaxation of macroeconomic policies to combat the COVID-19 pandemic and trade bottlenecks. And markets have not yet fully reflected the impact of the security crisis in Europe.

Sustaining this reform momentum is critical for the region’s future. First, the projected modest recovery from the COVID-19 pandemic will be put further at risk if policy frameworks are not further bolstered to ensure an appropriate response to the tightening of monetary and financing conditions in advanced countries. Second, and more importantly, achieving the long-term potential of the region will require staying the course on nimbleness, accountability, and integrity of monetary policy frameworks and central banks. This is a big challenge, considering the flurry of innovations, such as digital money and big data, which are bringing to the fore new stakeholders. The challenge is more daunting when you think of the ever-larger shocks we will face, including through pandemics, climate change, and armed conflicts.   

The IMF has long supported modernization of monetary policy in the SSA region. I am grateful to our Monetary and Capital Markets Department and our Institute for Capacity Development for the capacity development support they provide to sub-Saharan African central banks. Our regional training center concluded last week last Friday a training on Monetary Policy Frameworks and Operations that brought together junior to mid-level officials from 13 sub-Saharan African central banks. Last month, East AFRITAC, AFRITAC South and ATI organized with MCM and ICD a 5-day technical workshop with senior central bank officials of the region to discuss the implementation of Fund technical assistance on FPAS—Forecasting and Policy Analysis Forecasting Systems—in sub-Saharan African central banks. This high-level conference is the natural follow-up of that FPAS workshop. It brings together high-level central bank officials from SSA central banks, renowned academics and experts, and Fund staff to discuss paths toward further modernization of monetary policy frameworks in SSA to adapt to this changing world. We will continue to support central banks in the region through training and technical assistance.

I am particularly thankful to Professor John Taylor, Professor Kristin Forbes, Professor Athanasios Orphanides, and my former colleague Professor Carmen Reinhart for their support to the Sub-Saharan Africa region through their participation to this conference and many other contributions.

I am sure the discussions will help central bankers of the region as they confront challenges from the increasingly digitalized and volatile world.

Let me close by thanking our three regional capacity development centers for the organization of this conference and for their work, in general, leveraging their geographic position to read economic developments and priorities in the region. A special note to the administrative and IT teams. Thanks to the interpreters. Most central banks of the region are represented, regardless of the language they speak.

I wish us all an excellent conference.