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00:00There's quite a bit going on right now, especially when you think about in the geopolitical sphere
00:04and how that's factoring onto the continent. When you think about the greatest risk or
00:09potentially challenge that African economies are facing as it pertains to the Iran war,
00:15let's just start there. Is it potentially misplaced priorities or is it acting too fast
00:21just given the uncertainty of the moment? It's a combination of those things, Jennifer.
00:27I mean, to begin with, it's important to contextualize where many economies in the region
00:34were on the eve of the crisis, which is they've been rebuilding their economies,
00:40doing quite a lot of reforms and improving macroeconomic condition in the region.
00:46So just to give you a couple of examples, growth had accelerated last year to the highest level
00:51in almost 10 years at around 4.5% and was expected to accelerate even further this year.
00:57We had also seen inflation coming down to about 3.5%, fiscal deficits narrowing quite a bit
01:04and debt levels stabilizing and even declining uniquely around the world relative to emerging markets
01:10or advanced countries. So the region really was on a strong momentum.
01:15What this crisis now means is that growth will be a little bit lower.
01:19We're projecting around 4.3%. But more importantly, I think some of the countries,
01:25particularly on the eastern seaboard, are already feeling quite a significant shock.
01:31I mean, remittances have been impacted from the region.
01:34We've also seen, of course, supply of oil declining and the price going up very sharply.
01:40And all of this is undermining the strong momentum that the region was hoping to build on.
01:48The risk, of course, is that the need to reallocate resources in the short term to try and defray
01:54some of the costs of the crisis will undermine the longer term objectives countries have to use these resources
02:01to invest in health, education, infrastructure and all the other development spending needs have.
02:07So our advice is, of course, to some degree, there is a need to try and smooth the effect of
02:14the shock.
02:15But any such intervention should be temporary and targeted at the poorest.
02:20And to stay on course in terms of the medium term objectives countries have set for themselves.
02:28Do you see potentially more countries going to the IMF and needing emergency assistance
02:34or potentially tapping the IMF for more standard programs the longer this crisis sort of persists?
02:43You know, yes, that's quite likely.
02:47You know, the IMF was created exactly for circumstances like this.
02:51When you have these kind of global shocks which have significant effect on the most vulnerable economies,
02:57that's exactly when we step in and can provide support.
03:01As it is, we already have programs with about 24, 25 countries where we're providing some support
03:08as countries have been reeling from the effects of the pandemic and, you know, all the other recent shocks.
03:15And, you know, so we already have an engagement with these countries and we can, you know,
03:19re-parameterize those programs to support those countries that come for help.
03:24And a few others with whom we don't have an arrangement have expressed interest.
03:29And, you know, last week was important for discussions on how to move forward on those.
03:37How, how, what, what are those discussions for those countries that don't have programs at this point?
03:44What, what does that look like over the next few, few weeks and months?
03:48So, you know, in some cases, it was like just to identify what the right vehicle to support them is,
03:56whether it should be emergency financing type arrangement or a more medium-term program.
04:05Quite a few of the countries in the region have, you know, more medium-term balance of payments financing needs.
04:12So, the question was about which, which range, which type of arrangement would help.
04:17In other cases, it was more about, you know, technical assistance or capacity development or policy advice
04:22on how to deal with the crisis and not necessarily program.
04:28So, a range of, you know, we have a range of ways we're engaging with country authorities.
04:33And, you know, it depends on country circumstances what the discussions were like.
04:40And, and you did tell my colleagues that the, there are some discussions with countries and the fund about potentially
04:46support.
04:47What concerns you most about potentially how that could feed into the broader debt distress crisis
04:54that we are seeing across the continent?
04:56Because it's, it's sort of a balance that countries need to strike, right?
05:00Yeah.
05:01So, that's a great question.
05:03I think it's really important to note that the overall debt vulnerabilities in the region have increased since around the
05:14pandemic.
05:15And this reflects a range of circumstances.
05:18But it's also important to note that, you know, the particular, you know, the situation varies from country to country.
05:25In aggregate, what we've seen is that, you know, the level of debt in the region having stabilized and even
05:31declining somewhat,
05:33as I said earlier, reflecting significant reductions in the fiscal deficit that countries have been working on in recent years.
05:42Still, there are a few countries that have significant debt vulnerabilities, and for those countries, I think that the issue
05:51will be trying to secure as long-term concessional financing as possible,
05:56some fiscal reforms, and in some cases, they're going to have to consider debt reprofiling so that the burden of
06:04adjustment doesn't fall on their people, but rather is shared with creditors who have been getting significant rates of return
06:15on the loans that they have been providing to countries.
06:19So how you approach this debt challenge is going to be country-specific, and the situation varies quite a lot.
06:28Can you share some of those countries that you are talking about?
06:31I know there's been quite a lot of discussion about Senegal.
06:35That's one country factor.
06:37But what are some of the other countries that you're speaking about just in particular there?
06:42You know, so we have a couple of other countries like, you know, Malawi, South Sudan, for example, that are
06:48under significant debt pressure.
06:52You know, but it's also really important to note that, you know, in other cases, we've seen significant improvement in
06:58the debt situation.
06:59So countries in recent years that have gone through debt restructuring, such as Zambia, such as Ghana, once they addressed
07:08significant imbalances that they had and, you know, got debt relief,
07:14they have been able to recover extremely strongly and are now some of the fastest growing economies in the region.
07:20So the debt situation is not, how to say, it's not kind of, you know, always kind of doesn't mean
07:29the end of the world.
07:31I mean, it is possible to move from death crisis, as we've seen all around the world, including in Africa,
07:37and recover very quickly.
07:39And that's exactly what we're seeing in a number of countries that have gone through this process.
07:44And I mentioned Senegal there. We have some reporting about there was standing room only at a meeting last week
07:52around Senegal.
07:54I know you might not be able to get into the details, but what are some of the obstacles that
07:58remain between the fund and the country to potentially getting another program off the ground?
08:05So, you know, in Senegal's case, the new government that came into office in 2014 was very quick to flag
08:13to us, to the, you know, to the public and predators,
08:21that they had uncovered quite significant level of unreported debt, the misreported debt, that they were, you know, the debt
08:29that they had was being underreported.
08:31And, you know, so the transparency with which they have approached the situation really is extremely commendable.
08:38Now that they, you know, have this big level of debt, the issue is like how to address this debt,
08:44whether the country is going to need, you know,
08:49almost certainly significant amounts of financing, ideally, of course, at concessional terms.
08:55They're also going to have to do some fiscal reforms internally.
08:59And then the question is, like, what about the remaining gap?
09:02How best can that be filled?
09:04So the government is working on trying to secure as much concessional financing as they can.
09:10They're also looking at what scope there is for fiscal adjustment.
09:13So these decisions are not easy, as you can imagine.
09:16They take time and they have to be done in a very, very deliberate way.
09:19We're trying to support them as much as we possibly can and have a very good dialogue with the government.
09:26And, you know, we're waiting for them to come up with a program that can be fully financed so we
09:31can support it.
09:34I see.
09:35So it's sort of in the government's hand right now, at which point then the fund will step in once
09:40something is presented?
09:42Very much so.
09:42And I think this is true for all the other programs that we have with countries in the region.
09:48I mean, you know, as our managing director likes to say, this is not your grandfather's IMF.
09:56And, you know, we really encourage countries to develop their own reform programs, their own reform strategies.
10:04And then we come into support.
10:06Of course, we will weigh in on areas that we see probably, you know, being a bit too rosy, ask
10:13the government to reconsider the, you know, some, some, you know, scenarios.
10:20But it's always an exchange.
10:21And the primary driver is always the government.
10:24And we pay heed to their political constraints when we, you know, as much as possible to make, you know,
10:32in the context of these programs.
10:35So potentially we could see some more programs coming off the ground throughout the year.
10:40I know you won't be in the position, but we could see that.
10:43You know, look, as I said, the last five, six years have been a period of really very difficult external
10:54environment, which has impacted the region most acutely.
10:57And it has done so because, you know, the region is the one that relies on external financing to a
11:01significant degree.
11:02Of course, you still have a lot of poverty, a lot of development challenges.
11:06And when you have, you know, shocks of this global nature, whether it was the pandemic, the supply chain crisis
11:15that we saw, the Russia's invasion of Ukraine, you know, the monetary tightening, all of those have had very severe
11:21adverse effects.
11:22And that's all before the latest shock.
11:26In these circumstances, you know, countries have had to turn to the IMF for financing, which we've been providing.
11:32But the overall trajectory is one where economic outcomes are improving.
11:36And countries, sooner or later, will be able to move away from the type of exceptional financing we provide.
11:44And just on that, Bebe, you, the IMF dedicated an entire chapter in the regional economic outlook to aid cuts
11:53and really the impact that we have seen as it pertains to aid cuts.
11:57If we do, in fact, continue to see not just from the U.S., but from other developed economies cutting
12:04back on aid to the region and to African countries, are there particular countries that concern you most if this
12:12continues on as a trend for years and not just months?
12:17Very much so.
12:18And it really is the very fragile countries in the region, some of them conflict affected, many of them with
12:26very, very significant, you know, internally displaced populations or refugee populations that they're hosting.
12:33Those are the ones that really will be are and, you know, will continue to suffer in the face of
12:39these aid cuts.
12:40You know, we have the example of countries like Sudan, Chad.
12:45Right.
12:46You know, you know, and other countries in the Sahel who have facing really ruinous declines in in aid of
12:54Central African Republic is another one.
12:56And these are all these are all countries that are having to contend with very difficult development challenges.
13:02That's it is very difficult social situations.
13:04And on top of that, they are now facing a very difficult environment.
13:09And sadly, it's also the poorest people, the most vulnerable people in those countries that are going to be impacted
13:14the most.
13:15As they were the ones that were relying typically on on many aid flows.
13:20In still other cases, we are seeing, of course, health budgets being impacted.
13:24And all of the, you know, cumulatively, I think we are going to see less improvement in, you know, important
13:33indicators like infant mortality, maternal mortality in the coming years, which, of course, is a huge, huge tragedy.
13:40This said, I think I think I also want to stress that, you know, the region has shown tremendous resilience.
13:47You know, they're doing what they can to offset the decline in aid.
13:52And I don't think the region's economic history is going to be defined by by just what's happening at this
13:59moment.
13:59And I think, you know, we see a lot of progress and a lot of the opportunities that the region
14:06has being already tapped into.
14:11And maybe just finally, because we should mention, you are moving on from this role.
14:17You've worked in various parts of the fund for the past two decades.
14:21Just thinking about some of the opportunities.
14:24Where does maybe the evolution or the reform of the global financial architecture fit into that?
14:29Because that is something that I hear quite often and about how that reform could potentially serve the African continent
14:36more.
14:37What do you what are some of those opportunities that you think are maybe coming up for for the continent?
14:45Look, I think almost certainly in this century, you know, the world is going to have to reckon with a
14:54rising Africa.
14:57You know, this is this will be the African century demographically.
15:00We're going to be seeing Africans accounting for a bigger and bigger share of the population throughout the course of
15:07the century by, you know, in five, six years.
15:11We're already going to be accounting for more than half of the new entrants into the global labor force.
15:19Typically, as countries have gone through this kind of demographic transition, you've also seen per capita income rising quite significantly.
15:28And, you know, that's because, you know, this transition generally leads to much consumption, much investment demand.
15:35And, you know, I think it's high time the world starts looking at Africa as an investment destination.
15:43And I think, you know, we are seeing some signs of this, but this is going to almost certainly continue.
15:50I think the key is for us as Africans to make sure that we put in place the right reform
15:57environment to attract the much investment that we need from the private sector in particular.
16:03But, you know, I think this is a task at hand.
16:06And I think giving Africans more voice in the international community will be as important also to facilitate this.
16:14And what about reform of the fund and the World Bank and other institutions?
16:21You know, I think these reforms have been underway for a while.
16:25If you take the IMF, for example, you know, a third chair for sub-Saharan African countries at our executive
16:31board was created, you know, a couple of years ago.
16:37You know, Africa's membership of the African Union membership of the G20 was also the kind of change in the
16:43direction that you're talking about.
16:46But, you know, I think the truth also is that, you know, the world and often kind of these kind
16:53of architectures tend to evolve slower than reality in the ground.
16:58And I think what we have to do is make sure that our economies are growing, our people are being
17:04looked after.
17:05I think that's the key parameter and, you know, the rest will follow.
17:09I think that's the key parameter.
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