‘African Hope,’ but Continent Faces Challenges Too—Lagarde

Oil, commodity-price spikes among potential shocks for African economies

More financing for concessional loans for low-income countries next priority

Africa’s policymakers agree medium-term goals for growth, jobs

She told a news conference during the IMF-World Bank Spring Meetings in Washington D.C. that her next fund-raising priority was the topping up of the IMF’s resources that finance low-interest loans to low-income countries.

Lagarde was speaking after a meeting of the African Consultative Group, formed in 2007 to enhance the IMF’s policy dialogue with its African member countries. She noted that the IMF forecasts growth for the whole of Africa of about 4 percent for 2012 and 2013, with the continent’s low-income countries are expected to grow by about 5 percent for the same periods.

“I mentioned a couple of days ago the dark clouds on the horizon—well there is certainly African hope on the horizon as well,” Lagarde said.

Potential shocks

Lagarde noted that the group had discussed potential shocks that could affect African economies, including higher oil prices and more volatile commodity prices, and any resurgence of the euro area crisis. Those shocks would clearly slow growth, cool demand, cut aid, and reduce remittances.

“We concluded that those countries that have sufficient reserves and fiscal space should be able to ease macroeconomic policies to support demand. For other countries that do not have such fiscal room to maneuver, they will have to strengthen their positions and seek external funding if necessary,” Lagarde said.

Turning to how the IMF can further help African countries, Lagarde said she is also pushing on fund-raising—following IMF members’ pledges of more than $430 billion to boost the institution’s total lending power—to replenish the Poverty Reduction and Growth Trust. The trust provides resources to finance IMF low-interest loans to low-income countries. Members had agreed to use some of the profits from recent gold sales to put into that trust and now must complete the process.

“We need more money in that trust if we want to...