IMF expertise Helps Bolster Africa's Financial Sector

• Author: Inutu Lukonga and Steve Swaray
• Position: IMF Monetary and Capital Markets Department
• Pages: 138-139

Page 138

Across Africa, IMF monetary and financial sector experts are helping to develop and strengthen institutions, markets, and capacity to formulate and implement sound monetary and financial policies.

Positive impact from this help is reflected in stronger financial systems that support high sustained growth rates.

IMF technical assistance has also enabled cross-fertilization of skills among member countries and helped to disseminate and promote compliance with international standards. Beneficial spinoff includes increased participation of donor agencies in funding the IMF's capacitybuilding activities.

Supporting improved growth

The stronger financial systems complement the improved macroeconomic environment in many sub-Saharan African (SSA) countries. As noted in the IMF's Regional Economic Outlook for SSA, the region in 2007 experienced one of its highest growth rates in decades as real GDP expanded by about 6½ percent, fueled by growing production in oil exporters, improved credit intermediation, and rising domestic investment and productivity across the region.

Several African countries have developed financial markets that now attract institutional financial investors, and are promising candidates to become part of a second generation of emerging market countries. Finance & Development magazine says trends that heralded the arrival of institutional investors in emerging markets in the 1980s are visible in parts of SSA today-growth is taking off, the private sector is the key driver of that growth, and financial markets are opening up.

While solid global demand for commodities, greater flows of capital to Africa, and debt relief have helped increase resources and lift growth, impetus was also supplied by successes in stabilizing economies and implementing structural reforms, including in the monetary and financial sector. Specific areas of progress include:

* Reducing and containing inflation. Capacity to manage liquidity has improved and-helped by the development of monetary instruments, strengthened liquidity forecasting, and policy formulation processes-has contributed importantly to lowering trend inflation in many countries. Many SSA countries have successfully upgraded their payment and settlement systems and now have real time gross settlement, thus improving the efficiency with which central banks can...