tralac’s Daily News Selection
In Washington, DC: IMF’s Christine Lagarde at the launch of a new book, Race to the next income frontier: How Senegal and other low-income countries can reach the finish line
This new book goes beyond the often-discussed “what needs be done” and focuses on the too-often forgotten “how can this be done effectively”. The task is not easy, but Senegal and other low-income countries have an advantage. They can learn from the successes of other countries who have been here before. This book is a fitting example of how knowledge can turn into action. The drafting of this book has enabled policymakers to identify 11 critical reforms in areas ranging from good governance to social protection.
Senegal and ten other nations are now leveraging the new partnership under the G20 Compact with Africa to promote private investment as a way of better integrating their economies with the global economy. And this is just the beginning of what can get done.
The average quality of policies and institutions in Sub-Saharan Africa was broadly unchanged in 2017, according to the latest review by the World Bank. This is a shift from the deterioration observed in the previous year. This analysis covers 38 countries and describes the progress these countries are making on improving the quality of their policies and institutions. This average CPIA score for Sub-Saharan Africa remains slightly below the average of 3.2 for other IDA countries. “In 2017, African countries had a more favorable global environment that provided them with space to implement reforms” explained Punam Chuhan-Pole, lead author of the report. “According to our analysis, nearly 30 percent more countries strengthened their policy and institutional quality in 2017 compared with 2016. This is an encouraging trend.”
Favorable global economic conditions supported a turnaround in economic activity in Sub-Saharan Africa in 2017, easing pressure on weak policy frameworks. Country-level policy and institutional quality varied widely across the region. Rwanda continued to lead at the regional level and globally, with a CPIA score of 4.0. Other countries at the high end of the regional score range were Senegal, with a score of 3.8, closely followed by Cabo Verde, Kenya, and Tanzania, all with scores of 3.7. Overall, slightly more than half (20) of the region’s IDA borrowers posted relatively weak performance – that is, a score of 3.2 or lower. [Access the report (in English or French) and accompanying country, sector data here. The CPIA 2017 report in five charts]
Called the Country Resilience and Fragility Assessment, the tool offers a completely new method of assessing resilience and fragility using seven key criteria: political inclusiveness, safety and security, justice, the economy, social cohesion, the regional contagion effect, and climate change. “The creation of the CRFA represents a significant advance in the assessment of fragility, which is a reality that it is not always easy to pin down or discern. By introducing, for the first time, the concepts of ‘capacities’ and ‘pressures’, this new tool brings much more rigour and effectiveness to the assessment of resilience and fragility, especially since it takes greater account of the national context,” explained Sibry Tapsoba, Director of the Transition States Coordination Office. [AfDB’s Board approves policy on non-sovereign operations: the NSO Policy will complement the 2013 Private Sector Development policy framework]
Three perspectives on African structural transformation and governance issues, published by the AfDB:
Mushtaq H. Khan: Institutions in transformational governance – lessons for Africa. In the rest of this paper (pdf), section 2 outlines the arguments for market-enhancing institutions and governance, which we describe as the good governance agenda. Section 3 introduces the alternative argument for transformational institutions and governance, followed by three sections discussing in turn important aspects of transformational governance: section 4 looks at the transformation of property rights, section 5 at the institutions and governance required to develop organizational capabilities in emerging firms, and section 6 at political institutions and political inclusion. Section 7 concludes.
David Booth: Tackling the governance of economic transformation. The argument of this paper (pdf), then, is that the current policy agenda around economic transformation needs political economy analysis—as an integral component of advice and decision-making, not an optional add-on—and it needs an equally strong element of pragmatic and optimistic searching. Further, this is not a matter of achieving a balanced or optimal combination of hard-nosed analysis and pragmatic action. There are no trade-offs; the soundest approach will be the one that achieves maximum pragmatism along with maximum realism, or minimum delusion, about the political economic framework.
Richard Joseph: Governance for structural transformation in Africa. How, we must ask, can African countries advance politically and economically in this uncertain environment? Are there windows of opportunity for African organizations, and their external partners, to provide dynamic leadership, despite the head- and crosswinds. I therefore identify seven key opportunities and challenges in the following sections (pdf).
Somalia Economic Update: Rapid growth in mobile money – stability or vulnerability? (World Bank)
The special focus of the report (pdf) is on mobile money. Despite its fragility and underdeveloped financial institutions, Somalia has one of the most active mobile money markets in the world, outpacing most other countries in Africa. Approximately 155 million transactions, worth $2.7bn, are recorded per month. Mobile money has superseded the use of cash in Somalia, with over 70% of adult Somalis using mobile money services regularly. Nevertheless, the mobile money sector lacks robust consumer protection, and know-your-customer requirements. The mass adoption of services – while impressive – presents opportunities for promoting financial broadening and deepening that will lead to more competition and contestability in the financial services market. The challenge for policymakers and regulators is to how to mitigate system vulnerabilities and avoid macroeconomic effects in the event of service disruptions.
The Overseas Private Investment Corporation, yesterday, approved $895m in financing and political risk insurance across seven projects that will advance development in Africa, Asia and Latin America by expanding access to energy, healthcare, financial services and housing. Expanding an agriculture business in Ethiopia - $126m in political risk insurance to support the expansion of Afriflora, the country’s largest rose producer which grows, harvests and exports cut roses from three farms across the country. Flowers are one of Ethiopia’s major exports and expanded projection will create hundreds of new jobs, many which will be held by women. Promoting financing for women-owned businesses and digital banking in Nigeria - $200m in financing to help Union Bank of Nigeria expand lending to small and medium enterprises, as well as women-led and women-owned businesses, and to invest in upgrades to the bank’s digital banking projects.
Ghana: After China, what next? (GhanaWeb)
The Coordinator of the Third World Network, Dr Yao Graham, has cautioned government against rushing into agreements with powerful nations such as China that may lead to Ghana’s raw material being exported. He argued that the model being adopted by the government in signing the $2bn bauxite deal with China is not new, but an old system that has allowed the country’s natural resources to be exported in their raw state without adding value to it. Dr Graham stated that government’s approach in dealing with the Chinese will face fundamental challenges if Ghana is going to export raw materials from the bauxite. “So whichever way you twist it, it is very much based on a commodity export dependence framework. The agenda of transformation is also an agenda of diminishing your commodity export dependence. So let’s take the example about bauxite. Several people have pointed out there is lack of details and also the contradictory thing”.
The Minister for Information, Kojo Oppong Nkrumah defended government’s decision to partner with China in different economic agreements for national development. According to him, the current global environment makes China one of the best partners to work with for economic gains. “One of our biggest partners Nigeria doesn’t seem interested in that enterprise. So what are your options? You now look at China where EPCs coming, infrastructure coming. Financing that are not necessarily coming at some of these terms that are coming from other parts of the world. They are also looking at your resources that are sitting here literally untapped, undeveloped while you are sitting on them poor. You can do business with the Chinese”. [Abuja FOCAC 2018 Review Dialogue: China not Father Christmas – Chinese envoy]
Ghana’s Cedi depreciation: how do we stem the tide? (GhanaWeb)
A senior economist at the University of Ghana has said the central bank must combine short-term measures to deal with the cedi fall with a reliable strategy to deal with decades-old structural challenges stagnating Ghana’s economy. According to Dr Priscilla Twumasi-Baffour, tackling structural challenges like excessive imports and exporting goods without value addition would prove a more robust strategy to keep the local currency strengthened against the dollar and other major trading currencies. “We basically import everything,” she said during the Cedi Forum on Thursday, September 13, 2018, which discussed issues concerning the plummeting cedi. The cedi has lost almost 7% of its value against the strong dollar since the beginning of the year, prompting fears of dire consequences to the Ghanaian.
Revisiting the poverty trend in Rwanda: 2010/11 to 2013/14 (World Bank)
According to the official statistics published by the National Institute of Statistics of Rwanda, the country registered a decline in poverty from 46% in 2010/11 to 39% in 2013/14. This declining poverty trend was broadly debated and repeatedly questioned in national and international forums, which provided the primary motivation for this study. Using data from the third and fourth rounds of the Integrated Household Living Conditions Surveys, this paper revisits the national poverty numbers and corroborates the poverty rates published by the National Institute of Statistics of Rwanda. Underlying the paper’s conclusions is a detailed theoretical and analytical framework for making poverty comparisons over time. Furthermore, the paper shows that after adjusting for spatial and temporal price differences, the poverty rate based on the international poverty line of $1.90 per day per capita shows that there was a reduction in poverty between 2010/11 and 2013/14. [NISR, June 2016: Poverty Trend Analysis (2010/11 – 2013/14)]
West Africa Monetary Zone: update from 37th meeting of the Committee of Governors of Central Banks (Punch)
The ECOWAS authority had approved the reduction of the macroeconomic convergence criteria from 11 (four primary and seven secondary criteria) to six criteria (three primary and three secondary criteria). The three primary criteria being used are a budget deficit of not more than 3%; average annual inflation of less than 10% with a long-term goal of not more than 5% by 2019; and gross reserves that could finance at least three months of imports. The three secondary convergence criteria that have been adopted by ECOWAS are public debt/Gross Domestic Product of not more than 70%; central bank financing of budget deficit should not be more than 10% of previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10%.
Presenting a progress report at the opening session of the meeting, the Director General, West Africa Monetary Institute, Dr Ngozi Egbuna, explained that as of December 2017, none of the countries met all four criteria. She, however, said the average performance of the member countries of the zone improved during the year under review. For instance, Egbuna stated that The Gambia, Guinea and Nigeria attained three criteria each. She said The Gambia missed the fiscal deficit criterion; Guinea slipped on the gross external reserves, while Nigeria missed inflation criteria. She explained further that Ghana and Liberia achieved two criteria each. Ghana, according to her, missed the inflation and fiscal deficit criteria, while Liberia missed the inflation and central bank financing criteria. Sierra Leone, Egbuna added, met one criterion, which was the gross external reserves criterion.
Friday’s Quick Links:
Sudan’s new Minister of Finance and Economic Planning: UNECA’s Deputy Executive Secretary, Dr Abdallah Hamdok
The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, has been elected the new chairperson of the West Africa Monetary Zone
US House Committee on Foreign Affairs: access statements from the hearing Reviewing current developments in Ethiopia
Ecobank reports: The high cost of mobile data in Sub-Saharan Africa (pdf); Cryptocurrency regulation in Africa (pdf)
Gabon and the IMF: Second Review of the extended arrangement under the Extended Fund Facility
The State of Food Security and Nutrition in the World 2018: global hunger continues to rise
Seth Schindler: The new international geography of deindustrialisation