The deputy managing director of the International Monetary Fund (IMF) defended the role of this financial organisation “of last resort” in Africa, stressing that the loans make it possible to avoid “more disastrous” consequences for the economy and the most vulnerable.
Speaking to Lusa as part of a visit to Angola this week, Antoinette Sayeh praised the Angolan authorities, encouraging them to continue with reforms, and considered that the fact that they had, “in a very challenging context”, assimilated the financial assistance programme “in a solid way” was a critical factor in its success.
“We saw this throughout the implementation of the programme, in a very challenging context, with multiple shocks, since the pandemic, which forced some recalibration to continue to respond to challenges that are still very difficult, and very close work with the authorities,” she said, stressing that the programme was focused on macroeconomic stability since Angola, as an oil exporting country, is particularly susceptible to price shocks.
Asked whether a new programme was needed, she said that it was not at present, given the need to finance the balance of payments, and said that the authorities had not approached the IMF in this regard.
The former Liberian finance minister also spoke about the IMF’s role in African countries, saying that in the last four years of multiple shocks, it has proved to be “a safety net”, especially for countries that have few reserve funds.
“In this period we have seen a significant increase in financing needs and we have granted 58 billion dollars in loans (53.67 million euros) to sub-Saharan Africa, while at the same time providing technical assistance to strengthen macroeconomic policies,” he said.
This region, he emphasised, is the one that benefits most from technical assistance and training from the Fund.
Regarding criticisms of the austerity associated with IMF programmes, he recalled that most countries turn to the institution when they are already in crisis or close to crisis, with the Fund being “almost a lender of last resort” for countries that can no longer obtain other types of financing and allowing them to respond to immediate needs, such as paying salaries.
“IMF funding makes it possible to avoid more disastrous consequences for the economy and for the most vulnerable,” he noted.
He also emphasised that the IMF’s resources belong to the 190 member states that make up the Fund and “it is important that they are safeguarded for the needs of other countries, and this is allowed by conditionality”.
On the other hand, “countries also want some guarantees that the financing they have contracted will be available and the conditions that are agreed to restore macroeconomic stability, when they are implemented, allow countries to be assured that the resources will be there,” he explained.
Finally, they also have a catalytic effect, according to Sayeh, as they facilitate access to other funding and other international financial institutions, giving “some comfort” that the reforms will be implemented and will help the country return to stability and emerge from the crisis.
“That’s why this conditionality associated with our loans works best when it is assimilated by the countries, as was the case in Angola,” said the deputy director of the Fund.
Antoinette Sayeh acknowledged that sub-Saharan Africa needs “significant” levels of funding, and that China has played an important role with extensive financing that includes, for example, infrastructure, unlike the IMF’s concessional loans (loans with more favourable conditions than those on the market, characterised by low interest rates and longer repayment periods) and which respond to balance of payments needs.
He also assumed that vulnerability to debt in Africa is “high”, recommending that countries be careful about the levels of debt they take on, bearing in mind that the ratio to Gross Domestic Product (GDP) has almost doubled in low-income countries in the last ten years, skyrocketing from 30 per cent to 60 per cent.
“A significant number of low-income countries are over-indebted,” she warned.
Antoinette Sayeh emphasised that the IMF is now adjusting lending limits for these countries in the context of agreements such as the PRGF (Poverty Reduction and Economic Growth Facility) which is the origin of concessional loans for low-income countries.
“This facility has no interest associated with it and we are in the process of reviewing (the limits) to determine what other adjustments we need to make to respond to the needs of sub-Saharan African countries,” she told Lusa.
The IMF official also highlighted the new RSF (Sustainability and Resilience Facility) agreement, an instrument with longer maturities, aimed at countries facing new challenges such as climate change or pandemic preparedness, under which they have already granted 18 loans, half to sub-Saharan Africa, thus illustrating the Fund’s “agility” in responding to the needs of this region.
Antoinette Sayeh regretted that sub-Saharan Africa only benefits from 3% of the world’s foreign investment flows.
“It can do much better,” she emphasised, stressing that investments in natural resources can also be beneficial, depending on how they are used.
“They are not necessarily bad and countries (with these resources) have a competitive advantage,” he said.
In the case of Angola, he pointed out that the Portuguese-speaking country had “come a long way” and had managed to make considerable reforms on the fiscal and monetary policy side, while also advocating more attractive policies for investors outside the mineral resources sector.
Lusa
