Strong Reforms Offer Countries Path to High-income Status

SUMMARY

Sub-Saharan Africa’s small middle-income countries should implement strong reforms to boost growth and avoid the “middle-income trap,” seminar participants conclude in Mauritius, after reviewing the track records of seven countries and how the IMF can help.

 
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  • Seven small middle-income countries in Africa aim for high-income status
  • Growth drivers weaken, incomes rise slowly: possible “middle-income trap”
  • Peer learning could help advance reforms in region’s middle-income countries
  • At an event featuring peer-to-peer learning, 18 senior officials from seven small middle-income countries in Africa came together at the Africa Training Institute in Mauritius to discuss their common macroeconomic and structural challenges. They agreed that peer learning offers untapped potential to help move reforms forward in their countries.

    Organized by the IMF African Department and the Africa Training Institute, the November 18–21 seminar built on initial discussions during two earlier high-level meetings on the sidelines of the 2013 and 2014 IMF–World Bank Spring Meetings and joint work with the authorities in the context of a forthcoming book titled “Africa on the Move: Unlocking the Potential of Small Middle Income Countries (SMICs).”

    The seminar involved multiple stakeholders and received broad sponsorship from the IMF’s African Technical Assistance Centers in Ghana and Mauritius, from the Africa Training Institute in Mauritius, from the Regional Multi-Disciplinary Center of Excellence in Mauritius, and from the European Union.

    Avoid the trap

    Building on past success, small middle-income countries in sub-Saharan Africa have now set themselves the challenge of reaching high-income status and avoiding the middle income trap. While still positive, growth has slowed, as previous growth drivers weaken and the rise in per capita income wanes (see chart).

    The concept of a middle income trap grew from the observation that middle-income countries graduated to high-income status far less often than low-income countries became middle-income countries. From 1960–2012, fewer than 20 percent of middle-income countries—and none from sub-Saharan Africa—became high-income states, compared with more than half of low-income countries graduating to middle-income status.

    The seven small middle-income countries facing this trap in sub-Saharan Africa are Botswana, Cabo Verde, Lesotho, Mauritius, Namibia, Seychelles, and Swaziland. The seminar examined common policy challenges these countries face, reviewed what individual countries have done to address them, and how IMF surveillance can build on successful approaches to help countries move forward.

    Boosting growth

    Opening the seminar, IMF African Department Deputy Director...

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