Transcript of Africa’s Regional Economic Outlook

Transcript of Press Briefing: Regional Economic Outlook for Sub-Saharan Africa

October 13, 2023

PARTICIPANTS:

Abebe Aemro Selassie, Director, African Department, International Monetary Fund

Nicolas Mombrial, Communications Department, International Monetary Fund

* * * * *

P R O C E E D I N G S

MR. MOMBRIAL: Okay. Good morning, good afternoon and welcome to the IMF
Annual Meeting in Marrakech, including for our viewers around the world who
are watching us online. I’m Nicolas Mombrial with the IMF Communications
Department. I’m going to be your host today for this press briefing on the
Sub-Saharan Africa Regional Economic Outlook. And I’m very pleased to have
with me today Abebe Aemro Selassie, the Director of the IMF African
Department. Welcome, Abe and good morning. Maybe before I turn to your
questions, Abe, the Sub-Saharan Africa Economic Regional Economic Outlook
is called “Light on the Horizon.” Can you tell us a bit more about it,
what it is? Why are you calling it Light on the Horizon? What’s the IMF’s
perspective?

MR. SELASSIE: Sure. Thank you, Nicolas. Good morning and welcome to
this press briefing on the Economic Outlook for the Region. The Annual
Meetings are back on the African continent and really give us great
pleasure to be back here .

First time in 50 years, as many of you know, and we launched on Tuesday a
special issue bringing together data for the whole of Africa. This morning
I will be discussing the outlook for Sub-Saharan Africa. 2023 has been a
difficult year for the region’s economy, with growth slowing to 3.3 percent
from 4 percent in 2022. But we are cautiously optimistic that there is
light on the horizon.

Growth is expected to rebound to 4 percent in 2024 and is set to be broad
based. Importantly, governments in many countries are working hard to
address macroeconomic imbalances. Fiscal deficits, for example, have been
narrowing, helping stabilize public debt in most countries. These outcomes
are all the more encouraging given strong external headwinds, such as
slower international demand, expensive and difficult access to finance.
Still, it is too early to celebrate as many challenges lie ahead. The
funding squeeze is not over, and while debt levels have stabilized, the
cost of repayments has increased, and high debt service ratios to revenue
risk crowding out vital development spending. Inflation still too high
with one third of countries having double digit inflation. Policymakers in
the region face some of the most daunting policy challenges in the world.
They must continue to maintain macroeconomic stability amid limited
resources and development needs as they continue to face frequent shocks
and fragility. Against this backdrop, a strong focus on four interrelated
policy priorities can help.

First, addressing inflation in countries with elevated and rising
inflation. Further tightening might be warranted. Countries where
inflation is both falling and on track to meet their target could pause
monetary policy tightening. This matters, of course, because of the hugely
adverse effect that high inflation has in eroding the incomes of the
poorest people in society.

Second, reducing debt vulnerabilities while creating space for development
spending. This requires a delicate balance between raising domestic
revenues and reforms to foster growth.

Third, allowing the exchange rate to depreciate where needed. Avoiding
depreciation pressures at the cost of exhausting scarce international
reserves and eroding competitiveness often ends up causing more challenges
later on.

And finally continuing to increase investment in priority areas: health,
education, infrastructure – that’s growth enhancing. Needless to say, our
region is home to the fast growing and highly creative population, and we
must invest in them now to allow them to reach their full potential and
make this 21st century the African century. Thank you so much.

MR. MOMBRIAL: Thank you, Abe, for this very insightful introduction.
So, before I turn to your questions, just a couple of ground rules. So, if
you want to ask a question, please raise your hands and I’ll call on you
and one of the colleagues in the room will come and give you the
microphone. When you ask a question, please identify yourself and also the
outlet that you’re working with. For colleagues on Webex, you can type
your question on the chat box. And a reminder that we have interpretation
in French and Portuguese for colleagues who want to use it. Before I take
questions, I also had some colleagues joining sending us questions in
advance. So, I just want to take one or two. I think I had Rachel Delacour
from La Tribune Afrique. Rachel is there with the yellow jacket.

QUESTIONER: Hello. So, Rachel Delacour from La Tribune Afrique. My
question is debt, inflation, budget deficits, taxation. What should we
expect in 2024 in Sub-Saharan Africa, especially when we know that the
continent is considered to be the future of the world, while countries of
the region are still suffering from the development financing crisis?
Thank you.

MR. SELASSIE: Thank you, Rachel. I mean indeed, this is a very difficult
time for many countries from the macroeconomic sphere. And as you noted,
debt levels are elevated in vast majority of countries. Inflation, as I
noted just now, higher than we’d like to see, much higher than the previous
past. And financing challenges continue to be quite stringent. But as we
also noted, we are seeing signs of output beginning to recover. That’s very
encouraging. Growth decelerated from 4 percent to 3.3 percent. But if you
actually look at the median growth rate, it was stable at 4.1 percent for
the region and the slowdown in growth was because three, four large
economies saw activity declining this year. So, for the vast majority of
countries, we are seeing stability in the growth rate and even a broadening
of the recovery into next year. That’s encouraging.

Second, we are also very encouraged by the fact that policymakers have been
grappling with these challenges, some of the fundamental factors behind the
inflation pressures that we’re seeing – the debt buildup has of course been
high. The fiscal deficits and countries have been getting to grips with
that. Fiscal deficits have narrowed, helping stabilize debt. Growth, of
course, has also contributed.

So, we remain cautiously optimistic, as I said in my introductory remarks,
that the region is seeing, is beginning to recover. Again, there has been
a big fallout. Much remains to be done and the international community
definitely needs to support the region. But we shouldn’t underestimate also
just how much work has been done over the last couple of years in difficult
conditions.

MR. MOMBRIAL: Thank you Abe. So, let me take one more that I got before
from Uche there and then what I’m going to do, I’ll start on the right and
go take two or three there. Two or three there, two or three there.
Don’t worry, we should have enough time to take everyone.

QUESTIONER: Hello Uche from China Global TV Network. So, can you give us
some insight into those conversations that you’re having with Africa’s
creditors such as China, of course, as you urge them to provide those
financing assurances? And also, what concerns are these creditors like
China giving you in these debt talks?

MR. SELASSIE: Actually, you know, the vast majority of discussions here
take place of course with members directly and the discussion with
creditors tends to be between the borrower countries and the creditors. We
provide in general our assessment of the macroeconomic outlook, what kind
of financing gaps are likely to be emerging, how countries can best avoid
undue austerity where debt is unreasonably high. So, we engage and support
the authorities rather than directly with creditors. But we of course from
time to time do meet with creditors and the concerns of course are
creditors are being asked to provide significant financing, significant
debt relief right in some cases. And they of course have questions about
the projections that we sometimes provide underpinning the numbers. This is
a period of tremendous macroeconomic uncertainty, tremendous volatility,
and economic variables, and sometimes we have questions about why we are
projecting things the way we are and it’s in that nature that some of the
questions that are asked, and we try and address those questions.

MR. MOMBRIAL: Thank you Abe. As promised, I’m going to go there and take
two or three. The lady in the front row with the yellow.

QUESTIONER: Good morning. Good afternoon. My name is Thando Maeko and
I’m from Business Day in South Africa. Now the IMF has slightly raised
its growth outlook for South Africa to 0.9 this year, up from 0.6 earlier
this year, reflecting the economy which is hobbled by power outages. Does
the IMF see a high risk that there will be continued delays in structural
and governance reforms, that large scale energy shortages will persist
reflecting Eskom’s worsening operational and financial problems, and that
South Africa might experience a higher than expected budget deficits and
ballooning debt?

MR. MOMBRIAL: Thank you.

MR. SELASSIE: So, in general in the recent while, the calibration of
macroeconomic policies has generally been well balanced and the surprises
have come more on the structural side in South Africa, including of course
the hugely disruptive things that are going on in Eskom and energy
production in general. So, policies have had to be nimble. So, South
Africa, beyond kind of the exogenous shocks been facing from outside, has
also had this internal very disruptive shock. So, policies have had to be
nimble, and I think both the SARB and Treasury have been doing what they
can to address the implications of all of these shocks.

But I have to say that going forward, it will be important that South
Africa does deep rooted reforms that will address the challenges. In the
the network industries, we have seen them stifling exports. So, in some
cases, country has lost out on the commodity price boom that had taken
place in the last couple of years. And for an economy, for a country with
tremendous potential, with such strong institutions and all that
unemployment, really is disappointing that the country is not tapping into
all of this potential and exploiting that. So, keeping macroeconomic
policies as nimble as possible to address the emerging fiscal pressures
will be very, very important, but also the structural reforms to underpin
and facilitate higher growth.

MR. MOMBRIAL: Thank you, Abe. I think I’ll take the gentleman in the
second row on the right, please.
QUESIONER: Hello. My name is Francis Sinto. I write for the Ghanaian
News Agency. I would like to know Ghana added creditors assurance
somewhere in May yet has not had any agreement on debt treatment. The
Fund is also expecting that to be completed soon. How soon is the Fund
expecting this to be completed? And will the Fund progress with the
second tranche expected in December should the debt treatment agreement not
be reached?

MR. MOMBRIAL: Okay, just before I go to Abe, anyone else has a question
on Ghana? I know there are a couple of you. Okay, gentleme, in the first
floor there. I’ll take two in a row and then go back to Abe.

QUESTIONER: The IMF boss, Kristalina, indicated a prosperous global
economy in the 21st century requires Africa which has a booming youthful
population that is growing to be invested in by capital unlocked from the
advanced economies. What can the Fund do to encourage the advanced
economies which are experiencing aging population to unlock such funds to
help build the human capital of Africa?

MR. MOMBRIAL: Okay, can I take the lady in red, on the fourth row?

QUESTIONER: Thank you. My name is Vivian Kai Lokko, I work for City FM
and City TV in Ghana. Just to follow up on my colleague’s question on the
bilateral creditors, in case they are not able to reach a deal anytime
soon, what are the alternative measures the IMF would want Ghana to
consider in getting the $600 million for the second tranche? And also,
what is the latest with Ghana’s request for an IMF technical assistance to
conduct a governance corruption diagnostic assessment and addressing
weakness in existing asset declaration system for public officials. Thank
you.

MR. SELASSIE: Thank you. On Ghana, we are very pleased with the
progress that has been made in implementing the program since it was
approved by the Board and even a little before because there were quite a
number of important steps that had been taken, which are the process of
arresting the very large macroeconomic imbalances that were the root cause
behind the recent crisis and beginning to correct them.

Action is also needed from creditor side, of course, and I have to tell you
that whereas it took I think something like nine months or more for Zambia
to get the official creditor committee to be created, in Ghana’s case, it
was fairly rapid. So, that’s what allowed us to go to the Board and get
the program approved. And we’re very, very hopeful that the ongoing
discussions amongst official creditors will also expeditiously allow us to
conclude the upcoming review. Again, the most recent mission reached
agreement with the government on policies that are needed to tackle the
most recent issues and also put in place an important budget for next year.

So, Ghana has done its fair share and it’s for creditors to take steps and
we’re not going to be asking the government to do more adjustment because
creditors haven’t asked either. So, we will provide all the information
necessary so creditors can move, allowing us to go to the Board as soon as
possible.

On the governance diagnostic report. I think the request has been made.
I’m not sure kind of where we are in terms of being able to provide that
TA, but as soon as we have the resources, we will do that. And it’s just a
matter of time, I believe. Thank you.

MR. MOMBRIAL: Thank you, Abe. So, as promised, I’m going to go back
here. I already had two people, so I’ll take two more. Lady, you’ve been
waiting for a while and I’ll come to you here on the right, on the front
row. Sorry, the gentleman here.

QUESTIONER: Hello, I’m Mohamed Ben-Madani. I live in London. I run
the Maghreb Review. Given the fact that the conflict in Libya, war in
Sudan, terrorism everywhere in Africa, one wonder whether any sensible
commercial businessmen will invest in those areas. So, I’m also wondering
about your sources. How reliable are your facts? That’s the question.
The second question, can you tell us, what do you think about BRICS? Has
it any future? Thank you.

MR. MOMBRIAL: Thank you.

MR. SELASSIE: Thank you. You asked about the conflicts in the region,
and I don’t need to tell you that it’s not just in the Sahel, but a number
of other areas where there are conflicts in the region. Also at the same
time, I think it’s completely misguided to see the region, the entire
region, 54 countries in Africa, 45 in Sub-Saharan Africa as being conflict
affected and there’s no economic activity taking place. Extremely
heterogeneous and there are parts of the continent that are extremely
peaceful without any conflict either, or conflicts are being resolved
peacefully.

Our heart goes out, of course, to the displacement that’s happening in the
Sahel on top of the huge development challenges. Having these conflicts
was really awful, of course. And it is clearly a region which is
grappling with all of these challenges, including, of course, fragility,
instability. But we do have a framework, we do have a way of thinking and
supporting countries even in the context of conflict.

So, we just recently approved, for example, a program with Burkina Faso.
It’s important in the context of conflicts like this also, that state
institutions, central governments do not collapse, that they are supported
to continue providing basic services to their people. So, we are trying
to do the best we can, even in those regions, as much as conditions will
allow. So, it’s not just Burkina. We have a program with Central African
Republic. We have a program with Chad, and we try and support those
countries on those issues.

You asked about the facts. Of course, we work with country authorities to
develop the best understanding that we can about how economies are
evolving. And in terms of the private sector, of course, when a country is
driven by conflict, it’s difficult to envisage a lot of FDI, a lot of
private investment happening. But that still does not stop domestic
investors who make in every country, in every country in the world, the
lion’s share of investment is done by domestic businesses, by domestic
agents. That doesn’t stop them from continuing to invest and you know, the
reports we produce are as much for Africans as they are for investors from
London.

On BRICS, I don’t think I’m the authority that you want to hear from. It’s
a fantastic initiative. It looks like they’re expanding it and it’s very
important, of course, for countries to create groups that make sense for
them economically, politically, and I think it’s a great initiative.

MR. MOMBRIAL: Thank you, Abe. I’ll go to the lady in the third row
because she had the mic, and we took it away from her. And I’ll take two
at the same time. Then I’ll go to the lady in the first row.

QUESTIONER: Okay, thank you. My name is Nume [inaudible]. I write for
[inaudible] Newspaper, Nigeria. My question is on Nigeria. Can you speak
on Nigeria’s debt stance right now? Are there talks with Nigeria on debt
restructuring? Especially as a lot of our income and revenues are being
used to service debt. Also, inflation is something that we’re grappling
with right now, and inflation keeps going up. And this is coming after
IMF’s recommendations on recent reforms, on exchange rates, and energy
subsidies. But of course, it’s taking its toll on the citizens on
inflation. How best can we manage inflation? What would be your advice
to Nigeria to manage inflation? And then could you also speak on Nigeria’s
recent foreign exchange reforms? There was some devaluation there, as you
mentioned earlier, that it’s important to devalue in some instances, but
trying to harmonize it. There’s now another arbitrage, a big arbitrage,
again, with official and the parallel market. What best way can we have a
sustainable way to manage this? Thank you.

MR. SELASSIE: Thank you. I am not aware of any debt discussions that
are going on debt profiling, restructuring discussions that are going on in
Nigeria. There are, of course, like elsewhere in the region, debt
pressures. And I think in Nigeria, by far the most important cause of the
pressures is the fact that the government doesn’t generate enough tax
revenues for all the services it needs to provide. So, interest payment
as a share of revenues is very high and not leaving much room to spend on
other issues. I think that is the key issue and the one that needs to be
worked on.

Why are there not enough tax revenues? I think in the past, over reliance
on oil, it was when prices were high. Second, of course, also the subsidy
regime, which also implies, entails, quite a lot of loss of, government
resources being directed where they perhaps should not be. So, I think
these are all interlinked issues, including causing some of the inflation
that you’re seeing, because given the difficulty to tap international
capital markets, the government has had to rely more on domestic financing,
which has either crowded out the private sector or of course caused the
monetary injection, which again has weakened the exchange rate.

So, you have a medley of things mainly rooted in the fiscal challenges that
Nigeria has faced, not having tax revenues. At the same time, this is a
country with incredible potential, incredible potential. And we have seen
reforms moving in the right direction in recent months. What is needed, we
feel, is making the reforms holistic and help reinforce each other. Just
as things are not reinforced, were not reinforcing each other in the past,
I think there is scope to make the reforms reinforce each other. So, the
exchange rate reforms that the government did was very, very welcome,
trying to unify the rate, similarly the fuel subsidy. But that will not
help and will not stick unless you also are tightening monetary policy,
unless you’re also doing something to mobilize more tax revenues. So, a
holistic package of reforms is what’s needed, and I think we have to give a
bit of time to the new administration also, right? I mean, Central Bank
Governor has just been appointed. Minister of Finance has only been in
office a few weeks. So, we’re hopeful that they will move in the right
direction, and we stand there to provide any policy advice the government
needs.

MR. MOMBRIAL: Thank you. I actually wanted to go to the lady in black
in front, but let’s adapt. Since you have the mic, ask a question. I’ll
take you both at the same time before I go back to her, because she’s been
waiting for so long. I’ll give her the mic.

QUESTIONER: It’s fine, I mean, we’re friends.

MR. MOMBRIAL: You’re friends? Also, from Nigeria?

QUESTIONER: Yeah, sure. Okay, so thank you so much Nicolas. Good
morning [inaudible] from Business Day in Nigeria. I think my colleague
has taken some questions, but still on debt. So, Mr. Abebe, what’s your
assessment, really, IMF assessment on Nigeria’s debt, I mean, at 87
trillion naira, the highest we’ve seen. And then with debt to GDP estimated
to reach 37 percent this year, do you think Nigeria is approaching or is
already in debt distress or approaching that situation? Then two, just
yesterday, the CBN lifted the restrictions on 43 items banned in the
foreign exchange on the official market. Can you please comment on that?

MR. MOMBRIAL: Okay, can you give her the mic? Then I’ll take two and
continue.

QUESTION: Hi, good morning everyone. My name is Nkechi Nnanna and I’m
with Arise News from Nigeria as well. And I think my colleague already
asked some of my questions, but I just wanted a more specific IMF
recommendation on some of the coordinated policy you’d like to see between
the monetary and fiscal policy, especially when it comes to exchange rate
pressures, the move to unify the naira. The IMF has said it’s a necessary
one, but it’s not sufficient in itself. So, what sort of specific
coordinated policy reforms would you like to see Nigeria embark on just to
make that move sustainable? Thank you.

MR. SELASSIE: Thank you. Debt. So, the assessment of debt should not be
based on the nominal value of a debt stock, but rather how it relates to
many other economic variables. So, yes, it’s at the highest level because
you’re measuring it in naira terms, but as a ratio to GDP, as a ratio to
many other indicators, is what you have to look at.

When we look at the debt in Nigeria, our sense is that the stock is
manageable, in general. It’s the debt servicing that is much, much more
difficult. And the debt servicing is hampered, as I said earlier, by the
country not generating enough non-oil tax revenues. And I think that is
by far the most important area of reform, by far the most important area of
work that there is for any administration in Nigeria.

On the trade restrictions, our view has always been in Nigeria in many
other cases, our economies now are so sophisticated, so complex, I don’t
think that these kind of restrictions work. The best way to manage modern
economies for government authorities, they have fiscal policy lever,
monetary policy lever, is to try and use those to affect the kind of
outcomes you have, rather than going in and saying, I don’t like this good,
so I don’t want it to come in, et cetera. That tends to create unhelpful
distortion. Of course, you have tax policy that you can also use, like if
you really want to lean against certain types of import, et cetera. But
in general, I think the direction that CBN has moved in, I think is helpful
one.

Lastly on monetary policy coordination. I mean, it’s a very technical
issue, so I don’t know why you want to go into it, but what I think we were
saying when we pointed out that the adjustment was the correction to the
exchange rate gap was necessary, that’s not sufficient is unless you
underpin it with tighter monetary policy conditions. If monetary policy
is loose, it’s creating a lot of liquidity, then it’s going to create
inflation. And of course, the exchange rate will inevitably move, and the
official rate has to move. So, unless you are tightening monetary
conditions, it will not be enough. As well, you have to, of course,
support monetary policy with some fiscal policy tightening.

Again, as I said earlier, it’s the fact that the government is absorbing a
lot of the liquidity to finance the large deficit that it has, that’s
causing monetary policy to be loose. So, that’s the type of holistic and
coordinated reform package that Nigeria is going to need. And again,
Nigeria has incredibly able politicians, incredibly able policymakers.
It’s something that can be done. It’s just the political will and the
decision to move in that direction that’s needed.

MR. MOMBRIAL: Okay. Thank you, Abe. So, as promised, I’m going to go to
the left side of the room before taking a couple of questions online.
Please raise your hands. I don’t really see okay; can I take the lady with
the laptop?

QUESTION: Hello, Rachel Savage from Reuters. Thanks as always for these
engagements. They’re much appreciated. So, Kenya’s Central Bank Governor
told us that it’s asking for a third enhancement of its existing ECF/EFF
IMF program, potentially exceptional access as well. Is the IMF willing to
grant exceptional access, and if so, how much? Thank you. And just very
quickly, on Ghana, has there been an agreement yet on the cutoff date for
Ghana’s debt restructuring among official creditors, the IMF, et cetera, in
line with the DSA, and also on the inclusion or exclusion of the 2022
Afreximbank loan? Thank you.

MR. SELASSIE: Thanks. So, Kenya is one of these economies that has been
trying to do all the right things in the wake of the pandemic, and as it’s
been assailed by all of these very difficult exogenous shocks. We’ve been
really very encouraged to see policies remaining in the right direction,
particularly fiscal policy, where the primary balance has moved to a level
that will help stabilize debt. And yet, because of things that government
has not caused, but rather exogenous circumstances, capital markets remain
shut out and has created uncertainty.

We’ve shown in the past that for countries that continue to implement
policies as envisaged, that are moving policies in the right direction, we
do what we can to provide them with the financing they need. We’re very
encouraged that the government is very proactively working on a number of
options to address the maturities that they have falling due next year. I
think they’ve been communicating around that. And of course, we will do
whatever we can to support them. We have a team going out next week that
will engage in very proactive discussions, and we’ll be forward leaning to
make sure that Kenya continues to be on the right track.

MR. MOMBRIAL: Thank you. To make your life easier, can I go to the
gentleman who was just there behind?

QUESTION: My name is John Daniel Obioma from Nigeria. I want to address
the issue of brain drain in Nigeria and also as effects on other parts of
Africa. Does it bother IMF and World Bank that those who are supposed to
develop Africa are running away on daily basis in their thousands to other
parts of the world? What can we do about brain drain in Africa so that
development can exist? Thank you.

MR. SELASSIE: Very important question. What can we do? I think
ultimately, it’s making sure that our economies are as attractive, as
robust as possible. Right. And that goes back to the point I was making
earlier that the reforms that we need to do are not so much for attracting
businesses from outside but making it possible for our own people to
flourish, right? To do the best and to get the best out of it.

Second, yes, it is a drain, but I think we also need to see ways in which
we can have people outside the continent contributing back to the
continent. So, even you cannot stop from leaving if they have better
opportunities outside. But once they’re outside, I think finding ways in
which they can continue to contribute, of course, how important remittances
are for our countries right now, but also finding ways in which you can
attract more investment perhaps is also another way that we can work on
once people have left the continent.

MR. MOMBRIAL: Thank you, Abe. Could you raise your hand? I think the
gentleman there with the white shirt. And then I’ll go online.

QUESTIONER: Hi, thank you for having us. My name is Mario Batista, I’m a
journalist from the Portuguese News Agency Lusa. I’d like to know what
would release immediate fiscal space right now that the countries can do
with immediate results.

Also, on Equatorial Guinea, I’d like to know what is the new engagement
strategy that the IMF has referred to. And also, the African countries have
been requesting a third constituency in the IMF. I would like to know
what is your opinion on that and how the process is evolving. And the last
question on you said yesterday on an interview with Bloomberg that eight
African countries were already in debt distress or very close to it. I
would like to know if you could name those countries. Thank you.

MR. SELASSIE: Sorry, remind me, what was your first question again?

QUESTIONER: Fiscal space.

MR. SELASSIE: Fiscal space. So, I think it is difficult to identify a
single measure that’s going to cut across all countries. So, that’s going
to be very country specific. I can tell you that in some countries it’s
something like removing fiscal subsidies. Oil subsidies, which we’ve argued
again and again and again, is something that tends to accrue to the richest
segments of society rather than the poorest. So, I think using that
fiscal space created by removing fiscal oil subsidies to health investment,
education investment would be one. But again, it’s country specific, what
you can do to create fiscal space. In other countries, there are a lot of
tax exemptions, for example, again, that tends to narrow the tax space.
So, maybe revisiting the exemptions if they still make sense, those kind of
reforms.

Equatorial Guinea, we just had an Article IV mission recently. The
government has shown some interest in a program, so we’ll see if we can
move forward and how quickly in that respect. But we just had an Article
IV and are waiting to see the assessment. On the third chair for
Sub-Saharan Africa, you know, we’re very excited to see the membership.
This is a membership issue now recognizing the need for Africa to have more
representation at the Board. It looks like it’s something that’s garnering
a lot of attention and we’re excited to see. But this is above my pay
grade and so waiting for the final decision and how it will play out.

The seven, eight countries – it’s actually in the Regional Economic
Outlook, which countries are in debt distress and be taxing my recollection
memories and I don’t want to get things wrong. So, if I could please ask
you to refer to the report.

MR. MOMBRIAL: Okay, thank you. Abe, I’m now going to take one of the
questions online. I think I have Julians Amboko. Julians, can you hear
us?

QUESTIONER: Can you hear me?

MR. MOMBRIAL: Yes.

QUESTIONER: Thank you so much. Thank you, Abe, for this opportunity.
Quick question. There has been a growing push for the dollarization of
trade, given the hard currency crunch, many countries in this region are
facing. What’s IMF’s thought around that push and is there any support
being extended in any way or another towards the Pan-African Payment
Settlement System, which seeks essentially to bolster cross border trade on
local currency?

MR. SELASSIE: So, you know, I think the de facto dollarization we’ve
seen is as a result of the dollar being the general medium for transaction
across the world. And any initiative that of course minimizes the demand
for dollars that can provide facilities for countries to settle with each
other in local currency, we see as something that’s helpful. And we don’t
know for the full details about this initiative but looks like something
that’s encouraging and we’re happy to look at it and provide ways in which
it can be improved. So, generally a positive development, I think.

MR. MOMBRIAL: Okay, thank you. I think we have about 7 minutes left.
So, what I’m going to do now is more bit of a speed dating and I know Abe
is good at this. I’ll take two or three questions at a time. The lady in
the second row there.

QUESTIONER: Hello, thank you and good morning. I’m Zainab Joaque and I
write for Awoko newspaper in Sierra Leone. There’s the issue of currency
depreciation and redenomination challenges in Sierra Leone. As you are
aware, we are currently having two currencies in circulation. What policy
advice does the Fund have for our currency situation? Also, can you throw
a light on our current debt situation? Is it still sustainable?

MR. MOMBRIAL: Okay, wait, I’d like to take two.

QUESTIONER: Thank you very much. I’m from Ethiopia and I would like to
ask Mr. Abebe about the Common Framework related to the case of Ethiopia
and what is the current status? The second one is about inflation and the
cost of living is almost tripled in the past one year, especially related
to the commodities which are produced locally, including food items. So,
what do you think is the cause and what possible policy actions can the
government take? Thank you.

MR. MOMBRIAL: Okay, and then one more. I think there were hands
raised. The gentleman right there.

QUESTIONER: Good morning. Omar Benyedder from African Business. So, I
came a bit late. Hopefully you haven’t talked about this yet, but are
there any external shocks or any red flags that we should be anticipating
for the year ahead 2024? We’ve got Kenya that’s got a large debt maturing,
we’ve got the WTO said slowing global trade, rising nationalism, China
drag. So, what are the potential red flags that we should be paying
attention to that could add further distress? Thank you.

MR. SELASSIE: Thanks, on Sierra Leone, I think the country suffering
from many of the same pressures has been, of course, with the exogenous
shocks, but also domestically in the government having a fiscal deficit
that’s somewhat too high for the size of the financial market. So, working
on that will be very important.

Second, on the fact that you have two currencies circulating with each
other. When governments are doing such redenomination, it’s not unusual to
have two currencies circulating at one time. Otherwise, the government has
to pull out all of the old currencies very quickly, and that can be
disruptive. And we’ve seen that a bit in other cases, so it’s not unusual,
but of course needs to be transparency around it and making sure that the
process is orderly and as old currency comes into banks, that they are
taken out. So, I think that’s the process that’s going on there. We have
a program with Sierra Leone and just recently actually had a team that held
discussions for the 6th Program Review. I think it’s coming to the end.
And the team found policy challenges, heard from the authorities how they
were going to resolve them, and we have hoped to find a way forward that
will address that. Hopefully they will take the measures and we can go to
the Board soon with the Program Review.

On Ethiopia, you asked a question about Common Framework. I’ll answer that
for you. On other things, Annalisa Fedelino, my deputies here, you can
ask her more. On the common framework, of course, the way the process
works is countries apply to the Common Framework usually at or when they
have Staff Level of Agreement with staff. We don’t have one yet. The
government, I think, is still working on its reform program, so there’s no
Staff Level Agreement there. But that’s when I think the process goes in
earnest. But as I said, my Colleague Annalisa Fedelino will answer
questions there for you. Omar, all the questions on external shocks, I
mean, by definition, particularly forward, it’s difficult to foresee what
might be coming down the pike.

On Kenya question, I think that’s not so much a shock, but something that
is in the baseline and the government is working on a plan on how to
address that. And we’re, of course, supporting them.

MR. MOMBRIAL: Okay, so we do have to close, but I promise I take two
more on this side and then we close. And I have a colleague that follow up
with you later. The gentleman in the first row and then the gentleman in
third, and then we’ll close.

QUESTIONER: Thank you very much, Ramah Nyang from Bloomberg. Two
questions for you, Abe. So, debt clearly is a problem, but where do debt
for nature swaps payment for environmental services fit into these
conversations on debt relief or debt restructuring? A lot of the countries
that we’re talking about are acting essentially as enormous carbon sinks
for the rest of the world. If we’re in an economy in a world where we
could collateralize mortgages about a decade ago, surely, we should be able
to put a dollar value right on these environmental services and help find
the money that we need for climate adaptation. Finally, we did see quite a
few arguments around superseniority of debt from the IMF and in some cases,
the World Bank, coming up in debates around the treatment of debt issued to
countries like Zambia. Was this matter definitively sorted in yesterday’s
sovereign roundtable meeting?

MR. MOMBRIAL: Gentlemen in the third row, but then we’ll close.

QUESTIONER: Thank you, Nico. Thank you, Abe. In part, my question is
related to climate financing. I’m making the point that I’m hearing a lot
of talk about how the private sector has to be integrated in financing the
climate transition. But at the same time, we know that on the continent,
our private sector is not as equipped, nor is it as adaptable as perhaps
other developed countries. And I wanted to ask the question, when the
Fund says you look into the private sector, what are the chances that
African businesses will be equal participants in that transition, given our
challenges around funding and our challenges around capacity?

MR. MOMBRIAL: Okay, Ekow, I saw you jump there a couple of times. Can
you keep it to 1 minute, please?

QUESTIONER: Okay, thank you. What are the risks of a protracted Hamas
Israeli war on Sub-Saharan Africa? And two, how effective is the Common
Framework, given the seeming delays of the MoU for Ghana and Zambia? And
how does that speak about the effectiveness of the Common Framework?
Thank you.

MR. SELASSIE: Thanks. Ramah, on debt for nature swaps and the like, I
think by far the most direct, the most linear way for working with this is
probably things like carbon credits, right? So, countries that are making
contribution as a sink for greenhouse gases, of course, should be getting
carbon credits for the contribution that they’re making. The problem
arises when there are countries, say you’re an arid country in our region
and you’re not contributing in a positive way to that. How do you help a
country like that with the challenges that it’s facing with climate change?
So, I think this is still kind of — we can see the kind of a path forward
for helping DRC, but perhaps not for helping Chad. So, it’s not as easy
as you’re making it seem. I don’t think. It is also a little bit outside
the mandate and responsibility of the IMF, but we, of course, see the need
for the huge financing need countries have to adapt to all of this climate
change, and we work with them to identify that what they can do themselves
and are encouraging the international community to continue to providing
through traditional means while things like debt for nature swaps and other
creative solutions are being sought.

Super seniority point you said? I mean, this is one of the nice things
about this creditor debtor roundtable that we’ve spearheaded as an
institution. It’s nice because those have been among the reasons that have
been brought up when we’ve had specific country cases discussed with
creditors, these architectural issues around debt restructuring. So, they
have facilitated a debate and a response by the MDBs in particular on these
issues. And I think there’s now a broad understanding that exactly because
it’s at the time of need that MDBs in particular come forward with
concessional financing, why they need to be excluded, why their obligations
need to be considered differently to other entities. And so, I think
there is progress and understanding on this area.

On climate finance, we are, I think, helping countries most by of course
supporting them through the Resilience and Sustainability Trust. We now
have six programs on the continent, five in Sub-Saharan Africa under the
RST, and we’re using that to leverage more private finance to come into the
countries. Because there is a premium on external financing at the moment,
I think there’s been a lot more emphasis on trying to see what can be done
to attract external investors financiers into climate projects in the
country. But I think going forward I have no doubt we will also be working
with domestic private sector in this area also.

On the conflict in Gaza and Israel, I think the human toll that is exacting
is really what’s foremost on our minds and we’ve not done any economic
assessment on that.

Lastly, on the common framework that it’s been challenging, again, I think
the Common Framework is getting a really bad name. It did not exist just
two years ago. It did not exist. We didn’t have a way to bring official
bilateral creditors together in one room to discuss ways in which they can
work together to address the debt burden that our countries have. So, it’s
been less than two years already. We’ve had one case which has been done
and completed, Chad. Second case where there’s been enough progress for us
to not be disrupted in the disbursements that we’ve been making some delay,
yes, but not disruption in the steps; and that’s Zambia, of course. So,
program was approved in the context of the program framework a year and some
months ago. First review was concluded in the context of the program
framework. No issue there. Now it’s a second review and the memorandum
of understanding we understand is near finalization and that will happen.
And given that we’re not expecting to go to the Board for another few
weeks, hopefully it will be done and will happen. So, again, there have
been delays reaching agreements, but the support that countries need from
us, from the World Bank, has continued to happen. So, I think it’s really
important to recognize that process is working, and the headlines do not
quite meet what’s been happening on the ground. Thank you.

MR. MOMBRIAL: Thank you, Abe. Thank you, everyone, for attending. As I
said, if you have any follow up question, you know where to find me at the
Press Center. For colleagues who want to talk about Ethiopia, please go to
my Colleague Andrew, on the left of the room. With this, thank you,
shukran, merci and have a good day.

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