Paris Seminar Addresses African Adjustment To the Challenges of Globalization

• Author: Laura Wallace
• Position: IMF, External Relations Department
• Pages: 164-165

Page 164

The seminar was held against a backdrop of Africa's improving economic performance and brighter outlook, after some two decades of lost opportunities. Real GDP is growing at 4-5 percent, and per capita incomes are on the rise. Most important, although external circumstances and weather have helped in some cases, this progress is attributable primarily to good economic policies-getting prices right, reducing internal and external imbalances, liberalizing the exchange and trade systems, and proceeding with more fundamental structural reform.

Yet Africa's growth performance still lags behind that of many developing countries, and questions have been raised about whether recent economic gains are sustainable. This is particularly troubling, given that Africa now needs even faster growth to make up for the ground lost and to make a real dent in the pervasive poverty.

What challenges does this pose? Two key factors stand out. First, the private sector response is still very cautious, as evidenced by the inadequate rates of private saving and investment, including from abroad. Second, Africa has been relatively slow in integrating itself into the global marketplace. Thus, Africa has been missing out on the benefits of globalization and risks marginalization.

For this reason, the seminar sought to find ways to sustain, and even accelerate, Africa's growth in a globalized world. Seminar participants agreed that the answer lies in creating an environment that promotes better government and fosters private entrepreneurship. Indeed, the real challenge is not deciding what should be on the reform agenda, but setting priorities in the midst of limited capacities. Most agreed that five items-increasingly referred to as "second generation" reforms-should top the list. Besides the essential task of consolidating macro-economic stability, these include:

- establishing a clear and equitable regulatory framework;

- strengthening the financial sector and improving financial intermediation;

- further liberalizing exchange and trade systems;

- enhancing capacity to formulate and implement national reform programs; and

- improving public resource management and delivery systems in support of basic social services.

Regulatory Reform

On regulatory reform, participants agreed that a business-friendly and predictable regulatory environment...