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04 Oct 2009 10:47
The global economic crisis has increased Africa’s debts but the deterioration has not yet reached levels that are a concern, a senior International Monetary Fund official said on Saturday.
In an interview with Reuters, IMF director for Africa Antoinette Sayeh said that in countries where debt or high inflation are not a problem, fiscal and monetary policies should remain supportive.
However, she said other countries will need to be ready to shift fiscal policy once a recovery has been established to prevent debts from escalating further.
“We need to be careful because we’ve already seen some deterioration of debt sustainability indicators in some countries,” Sayeh said on the sidelines of the IMF and World Bank meetings here.
“Some of the debt ratios are not looking as good as they did but we expect growth to resume in the next couple of years, so they have not deteriorated to levels that are worrying us,” she said.
“We think countries at least for 2010 countries need to look at their budgets in the perspective of the recovery not yet fully under way.”
In a report, the IMF said countries in debt distress include the Democratic Republic of Congo, Zimbabwe, Guinea and Liberia. Others with high debts are Central African Republic, Gabon and Burkina Faso.
Africa’s debt burden had eased in recent years thanks to international debt relief programmes and better economic policies.
But the financial crisis and higher food prices last year added to budget pressures, threatening to set back progress these countries made to cut debts and reduce poverty.
The Fund has forecast that growth in Sub-Saharan Africa this year will rise by just 1,1% before strengthening to 4,1% in 2010 and 5% in 2011.
Sayeh, a former Liberian finance minister, said a recovery in Africa would depend on a strong rebound in the global economy, increased global trade, higher commodity prices and a pickup in worker remittances.
“I don’t think trade numbers are showing a significant recovery in exports yet, but by next year we’re anticipating that will be coming back,” Sayeh said.
The IMF report said there are also questions over whether the subdued growth prospects for the global economy might delay Africa’s recovery.
“The outlook is certainly not without risk and it will just have to be managed depending on the pace at which the global economy recovers. If it doesn’t recover to the extent that we’re expecting, then we’re in for a long haul,” Sayeh added.
The Fund has said that a global economic recovery has begun, but it has cautioned that the rebound will be sluggish, especially in advanced economies. Both China and India have sharply increased trade and investments in Africa, which could also aid Africa’s recovery.
The IMF report said South Africa’s recovery is likely to be slow with growth expected to reach 1,7% in 2010 before rising to 3,7% in 2011.
Sayeh said the IMF did not think the rand was too strong or “out of whack” despite its gains in recent months against a weaker US dollar.
The rand has gained about 20% against the US dollar so far this year, gains that Reserve Bank Governor Tito Mboweni has repeatedly said could lead to imbalances in the economy.
Asked about debt relief for Zimbabwe, Sayeh said there was talk in some quarters about clearing a portion of the country’s multilateral debt, which would not by itself help the country win financing from the IMF and the World Bank.
She said the IMF was encouraged by the significant rise in government revenues in Zimbabwe and a reduction in inflation, but cutting spending on wages presents a challenge.
Sayeh said further political and economic reform efforts were needed before it won international support.
Zimbabwe has more than $1,1-billion in arrears to creditors, including the IMF, World Bank and African Development Bank. - Reuters
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