Transcript Financing for Development - Conference of African Ministers

Financing for Development: A
Progress Report on the
Implementation of the Monterrey
Consensus
Meeting of the Committee of Experts of the 3rd Joint Annual
Meetings of the AU Conference of Ministers of Economy and
Finance and ECA Conference of African Ministers of Finance,
Planning and Economic Development
25-28 March 2010, Lilongwe, Malawi
Current status of
international finance
• The current financial system is
characterized by instability and highly
uneven distribution of capital
• African countries require adequate and
long term capital flows to sustain growth
capable of reducing poverty
Hence the importance of monitoring the
implementation of Monterrey Commitments
Approach and Methodology
• Analysis of the 6 core areas of Monterrey
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Domestic resource mobilization
International resource mobilization
International trade
International assistance
Debt relief
Systemic issues
• With the comparison of two periods:
• Pre-Monterrey (1995-2001)
• Post-Monterrey (2002-2008)
• Analysis of trends in recent years
Economic Performance in
Africa
Pre-Monterrey growth rate:
World: 3.1%
Africa: 3.6%
Post-Monterrey growth rate:
World: 3.2%
Africa: 5.7%
• Africa has experienced 6 years of strong
growth mainly driven by robust global
demand and high commodity prices
• Growth accelerated in all African subregions in the post-Monterrey period
• However, the global financial crisis has
pulled growth trend down to 2% in 2009
Domestic resource
mobilization
Pre-Monterrey
Savings ratio: 18.3%
Investment ratio: 19.8%
Post-Monterrey
Savings ratio: 24.5%
Investment ratio: 22.9%
• Savings followed an upward trend in the postMonterrey period
• In 2009 however this positive trend was
interrupted and Africa experienced a sharp drop
in savings
• Tax ratios in Africa are still too low and 11 African
countries still raise less than 15% of GDP in
taxes
• Structural constraints and the effect of the
financial crisis pose a serious challenge to
increased government revenues
International resources
mobilization
Pre-Monterrey
FDI (current USD): 10.1%
FDI (% GDP): 2.7%
Post-Monterrey
FDI (current USD): 26.8%
FDI (% GDP): 5.3%
• FDI rise sharply between the two periods, with
the most noticeable increase in North Africa
• Year-on-year drop in FDI of 67% is noticed in
the first quarter of 2009
• Uneven distribution of FDI across countries and
sectors
• Remittances have been steadily increasing but
contracted in 2009.
International trade
Pre-Monterrey
Export (%GDP): 29.4%
Growth in exports: 7.3%
Post-Monterrey
Export (%GDP): 36.3%
Growth in exports: 9.5%
• African exports have experienced an
upward trend after Monterrey, particularly
driven by commodities
• Drop in global demand resulted in a drop
in Africa’s exports in 2009
• Narrow export base, with declining share
in global trade
International assistance
Pre-Monterrey
Post-Monterrey
ODA (Billion USD): 10.3
ODA (Billion USD): 20.5
• ODA to Africa has increased sharply in the postMonterrey period
• However the target of 0.7, confirmed at
Monterrey, is still out of reach
• Aid quality should be improved
• Innovative sources of financing have developed
and many initiatives have emerged
Debt relief
Pre-Monterrey
Post-Monterrey
Total external debt (%GDP): 64.8
Total external debt (%GDP): 38.1
• Both as a percentage of GDP and of
exports, debt has declined since
Monterrey
• 21 African countries reached the
completion point under the HIPC Initiative
• However sustainability remains a problem,
due to new borrowings associated with the
shocks of 2008
Systemic issues
• Progress in the area of systemic issues
has been disappointing
• Despite its size, Africa has too little voice
in international institutions such as WB,
IMF and WTO and at the G20
• Africa’s specific needs should be taken
into account in the current debate on
reshaping the international financial
architecture
Conclusion
• Progress has been made in all areas but systemic
issues, during the post Monterrey period, particularly in:
• International resource mobilization
• Debt relief
• However there is room for improvement in:
• Domestic resource mobilization (low tax ratios
below the 15% GDP threshold in various countries)
• Foreign aid (donors still not on track on the 0.7%
GNI and on aid quality)
• International trade (lack of diversification)
• Systemic Issues (Africa needs to achieve more
effective participation in decision-making and
norm-setting in international financial and trading
institutions)
Policy Recommendations
Need to adopt a more proactive approach in implementing
Monterrey, particularly by:
• Strengthening institutional framework including financial
markets
• Stepping up technical support and training for national
capacity building
• Increasing Africa’s voice and representation
• Harmonizing national, regional and international efforts
and pursue policy coherence
• Implementation of the Paris Declaration and Accra Plan
of Action on Aid Effectiveness
Thank You!
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