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“Reinforce emphasis on macroeconomic stability for economic growth”

…IMF urges Sub-Saharan Africa governments

June 6, 2017 By Joseph S. Margai

Deputy BSL Governor, Dr. Ibrahim Stevens and IMF Rep. Dr. Iyabo Masha at the seminar

Resident Representative of the International Monetary Fund (IMF) to Sierra Leone, Dr. Iyabo Masha, has urged governments of Sub-Saharan Africa to reinforce emphasis on macroeconomic stability in order to ensure a stronger and durable recovery of the economy.

Dr. Masha was making a presentation yesterday at the main conference hall of the Ministry of Finance and Economic Development in Freetown on the Regional Economic Outlook for Sub-Saharan Africa.

She said 2016 saw a broad-based slowdown of the economy, with commodity exporters being particularly hit, adding that in some cases, compounded by rising food insecurity.

“Inflation was ticking up in many countries in the Sub-Saharan region. Fiscal deficits have widened among hardest-hit countries and remain elevated elsewhere. Higher borrowing costs have made recourse to external market financing less attractive, leading to greater recourse to domestic financing,” she explained.

She added that exchange rates have depreciated, but not sufficiently in some cases with parallel markets spread emerging and reserves are trending lower for the region, and acutely so for oil exporters.

She said debt levels are on the rise in the region especially public debt, increasing the pressure on debt sustainability, especially in oil-exporting countries.

Dr.Masha noted that the financial sector was feeling the pinch, with asset quality declining, and credit to private sector slowing sharply.

She disclosed that among the three priority areas to ensure stronger and durable economic recovery include reinforcing emphasis on macroeconomic stability, structural reforms to support healthier macro balances and stronger emphasis on social protection.

“Reforms needed to support macroeconomic objectives include domestic revenue mobilization, greater emphasis on safeguarding financial stability, fostering economic diversification and state-owned enterprise reforms to limit contingent liabilities,” she said.

Dr. Masha said countries were more likely to come out of the economic growth problem when policymakers make more flexible policies on market, exchange rates, and also be able to direct more resources to the vulnerable and less-advantaged ones in the economy.

Making a presentation on the Informal Economy in Sub-Saharan Africa, Herbert M’cleod, Country Director of the International Growth Centre (IGC) of the London School of Economics, Oxford University, said the informal economy in Sub-Saharan Africa remains among the largest in the world but with significant heterogeneity across the region.

He said informality can be an essential safety net providing employment to a large number of people.

In the area of policy considerations, Mr. M’cleod said governments in Sub-Saharan Africa should create an economic environment that increases the productivity of the informal sector and facilitates the transition of resources from the informal to the formal sector.

“They should also support enterprises, which provide a safety net, as the transition process takes a long time,” he said.

Deputy Governor, Bank of Sierra Leone (BSL), Dr. Ibrahim Stevens, said he was a fervent follower of economic analysis that comes out from both the World Bank and International Monetary Fund in Washington.

“These IMF publications are very important because they try to address contemporary economic issues in a manner at which all countries should be able to utilize for various reasons,” he said.

He said there are three parts of the IMF report which include stock take of growth dynamics in the region, the business cycle line and the informal sector. He added that the informal sector is more applicable to Sierra Leone.

“The Bank of Sierra Leone and others across government have been trying to understand the informal sector. For instance, the informal foreign market gives and takes on a weekly basis about three billion dollars ($3bn), which amounts for 10% of volumes in the sector,” he said.

He added that BSL has been working to try and advance financial sector development and one of the key objectives of that was to try and bring more people into the sector so that the bank could increase its customer base.

He said if the Bank can bring more customers in, have more attractive financial products that they could sign up to, the Bank would have a larger depositors’ fund to do so many other banking activities, thereby accelerating economic growth.

“Fixing the macro aspect of the economy just with 25%, we will accelerate macro growth by about 5%,” he said.

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