Financial sector reforms and debt management in Africa : volume one

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EconomiC CommiSSion for Africa

Financial Sector Reforms and

Debl management in Alrlca

UOlume One

proCeedingS ollhe SIKlh Sesston of Ihe Conference 01 Alrlcan MlnlSlers 01 Finance

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1887 EconomiC commission lor Africa

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The opinion, figures and estimates found in this publication do not necessarily reflect the view or carry the endorsement of the United Nations.

The designations employed and the presentation of the material do not imply the expressions of any opinion whatsoever on the part of the Secre- tariat of the United Nations concerning the legal status of any country, territory, city or area, or its frontiers of boundaries. Mention of private and public organizations does not imply the endorsement of the United Na- tions.

For more infonnation on this and other ECA publications, visit the ECA web site at: http\\'MVW.un.org/depts/eca.

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Acronyms

ACIvlF African Capital Markets Forum

ADB

African Development Bank

AERC African Economic Research Consortium BCEAC Central Bank of Central African States BCEAO Central Bank of West African States

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DSA Debt Sustainability Analysis ECA Economic Commission for Africa ESAF Enhanced Structural Adjustment Facility IDA International Development Association FDI Foreign Direct Investment

GDP Gross Domestic Product

HIPC Heavily Indebted Poor Countries Initiative IMF International Monetary Fund

MEFMI Macroeconomic and Financial Management Institute

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_MFI Multilateral fmancial institutions OAU Organization ofAfrican Unity aDA Official Development Assistance

SADC Southern African Development Conununity SAP Structural Adjustment Programme

WTO World Trade Organization

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Foreword

The Sixth Session of the Conference of African Ministers of Fi- nance was held in Addis Ababa, Ethiopia, from 3 1 March to 2 April 1997 and was preceded by the Meeting of Experts from 25 to 28 March 1997.

The conference, which was attended by forty Ministers and twenty Cen- tral Bank Governors and other high-ranking officials and senior participants and personalities, convened under the theme"FinancialSector Re- forms and Debt Management"in Africa.

As we prepare to enter the twenty-first century, Africa is acutely aware of the fact that it could risk further marginalization if it does not take advantage ofthe opportunities generated by globalization and liberalization ofthe world economy. The need to strengthen Africa's physical and policy structures to meet the challenges of globalization and liberalization has become an imperative for the continent. This conference whose focus was on the role ofmultilateral financial institutionsinAfrica's development process, financial sector refonns in Africa and the debt problem was, therefore, both timely and an opportune occasion to deliberate on these important issues that continue to shape Africa's development path. Arguably, financial sector reforms and management of the excruciating African debt problem are among the necessary actions that could provide significant impetus to sustainability of growth on the continent and help its integration in the world economy, particularly at a time when aDA flows are declining and competition for external financing and FDI has become much keener.

Within the context, the conference deliberated on a number of challenging development issues including the role of multilateral financial insti- tutionsinAfrica'sdevelopment~financial sector reforms; challenges of the African debt, with focus on the Heavily Indebted Poor Countries (HIPC)

Initiative~and the challenges and opportunities ofemerging capital markets in Africa. Many pertinent recommendations were made. There was broad consensus as to the specific actions needed to be urgently implemented and which were elaborated in the context of the report on the deliberations ofthe conference. These recommendations are particularly useful for shap- ing development policies as well as guiding the assistance perspectives of our development partners.

This consensus has become possible partly through the significant changes that we introduced in the format of the conference by making it

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truly participatory and open. There were broader consultations on the agenda. Sensitization missions were sent to meet with the Ministers of Finance and Central Bank Governors in a number of African countries.

The conference deliberations were also conducted in panel discussions to ensure maximum interaction between the Ministers, Governors and high ranking officials and senior participants. This interaction was further enriched with the participation for the first time of the private sector, where a number of Chief Executives of African capital markets, international and regional financial institutions and commercial banks attended. The rewards ofthis participatory approach convinces us ofengendering similar trans for·

mation of the format and substance of our future conferences.

In this respect, I wish to take this opportunity to express my profound gratitude, and that of the Economic Conunission for Africa, to the Honourable Ministers of Finance and Governors ofAfrican Central Banks, Chief Executives of international and regional organizations and sub-regional institutions as well as the Chief Executives of African capital markets and commercial banks for their attendance and active participation. I wish also to pay special tribute to a number of organizations and institutions whose participation has been instrumental in the success of this Con- ference. Among these are the African Economic Research Consortium (AERC), the World Bank, the International Monetary Fund (IMF) and the African Development Bank (ADB).

K.Y. Amoako Executive Secretary

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Executive Summary

The Sixth Session of the Conference of African Ministers of Fi- nance held under the theme "Financial Sector Reforms and DebtMan- agement", took place in Addis Ababa, Ethiopia from 31 March to 2 April 1997. The conference was preceded by the Meeting of Experts from Min- istries of Finance and Central Banks held from 25 to 28 March 1997. The Ministerial segment of the conference was organized into two plenary and three panel sessions in order to allow as much participation and interaction among delegates as possible.

The theme of the conference as well as the issues discussed during the various panel sessions centred on topical issues of developmental importance to Africa and included: the role of multilateral financial institutions in Africa's developmentprocess~financial sector reforms in Africa: realities, problems, and lessons from country experiences; challenges of the African debt problem; and the role of capital markets in Africa in mobilization of resources. The conference was convinced of the urgency of addressing these issues as they are at the centre of the necessary conditions for the continent to attain sustainable development. The Meeting of the Intergovernmental Group of Experts preparatory to the conference, deliberated extensively on the best approaches to these and other issues, indud- ing problems of exchange rate management in Africa.

The need for Africa to adapt to the changing international economic and financial environment is widely recognized and appreciated both by African countries and their development partners. The globalization and liberalization of the world economy pose both challenges and provide opportunities for Africa usheringina new era of keener competition for physical and fmancial resources. Furthennore, technological changes are making production and marketing processes obsolete. Significant advances have also been made in the international financial system both in tenns of the range of financial instruments that have emerged and the institutional framework needed for effective financial intermediation. In such an environment, it is imperative that Africa makes the necessary adjustments in order to take advantage of the emerging opportunities in the world economy.

The plenary session discussion on "The Role of Multilateral Fi- nancial Institutions in Africa at theTurn of the Century" was therefore intended to situate the contribution of these institutions to Africa's

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development as the continent approaches the twenty-first century. Multi- lateral financial institutions have come to occupy a key position in Africa not only as suppliers of development finance, but also as advisors to Afri- can governments on development issues as well as a reference point for donor funding to the continent. Itis essential therefore to take stock and examine future roles of these : :stitutions in Africa's development process, notably regarding the challenges facing African countries to achieve sustainable development, reduce poverty, and effectively integrate in a global- izing and liberalizing world economy.

On this issue, the conference noted that although Africa as a region was once more experiencing renewed positive GDP growth, nonetheless sustainable development was proving illusive in many countries. More- over, the continent was experiencing shrinking flows of official development assistance and stagnation of private flows at a time when many countries were implementing far-reaching refonns. There was, therefore, need for Africa to intensify its efforts at mobilization of domestic resources to augment external finance. The conference stressed the importance of the role played by multilateral financial institutions in supporting this process.

It also recognized the role of micro-finance as an avenue for supporting production in rural areas and alleviating poverty in Africa. In this respect, multilateral financial institutions, especially the African Development Bank (ADB), were called upon to cooperate with sub-regional development banks to devise the best strategies for promoting specialized financiaJ institutions targeting rural and urban micro enterprises. The conference also called on multilateral financial institutions to support regional cooperation and integration in Africa and to suggest practical modalities for enhancing this process.

On the panel discussion on "Financial Sector Reforms in Africa:

Realities, ProblemsandLessons from Country Experiences",the conference noted that many African countries have in recent years embarked on financial sector reforms, in the context of overall reforms oftheir economies. These refoons have focused on reducing financial repression, restoring bank solvency, and improving financial infrastructure. In a number of these countries, such reforms have been designed to: increase competition in the financial sector by opening up entry and exit from the sector; increase the range of financial instruments available to both savers and in- vestors through expanded financial infrastructure and instruments; improve the determination of interest rates inorder for them to reflect the opportunity cost offinanciaJ resources; improve the allocation offoreign exchange

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and the determination of exchange rates to reflect opportunity cost~ and improve the overall process of financial intermediation, mobilization and allocation of financial resources.

The conference agreed that financial sector liberalization has had positive results in a number of African countries. However, it was ob·

served that the implementation of such reforms has created initial problems in some countries. Accordingly, the conference discussed both the positive and negative effects of financial sector refonns with a view to allowing African countries to share best practices. Among the issues discussed was the need to fonnulate, design, and sequence financial sector refonns taking into account the state of the financial system and its struc-

ture~ and the need for developing effective interbank markets.The conference emphasized the importance for African countries to look for strategies for self-reliance. While external finance (ODA, concessionallending and foreign direct investments) will continue to fonn a significant source of development finance for Africa, emphasis should be given to strategies for the mobilization of domestic resources.

On the panel discussion on "Challenges of the African Debt Prob- lem," the conference noted that the debt problem constitutes a major constraint on Africa's development. Hence the importance of addressing this problem within the context of restoring the growth and development momentum in the continent. The recently launched Heavily Indebted Poor Countries (HIPC) Initiative has been wannly welcomed in a number of quarters including several African countries, which constitute the majority ofthe targeted group of poor countries to benefit fromit. The HIPC Initia- tive is indeed a serious commitment by the international community to tackle the external debt problem of heavily indebted poor countries, and more especially, it focuses on multilateral debt which was previously ex- cluded from the external debt renegotiation and reduction process.

Furthennore, the Initiative is conceived within the overall framework of assisting poor countries to achieve debt sustainability in the context of overall economic development. In this respect, the Initiative recog- nizes the intricate linkages between debt sustainability; efficient, transparent and accountable economic management~ good _govemance~ trade expansion and diversification, combined with market_access~and economic and social development.

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The conference observed that although a number of African countries have welcomed the Initiative, some issues are yet to be made clear, among which are those relating to the working oftheInitiative~its practical

benefits~and whether it would result in expanded capital flows to African countries. A number of technic'll questions arise regarding definition of debt sustainability and the critena used to delineatecountries~the issue of the detennination of the cut-off date for multilateral debt which-has never been rescheduled before; and the magnitude of the resources to be made available under the Initiative.

On specific areas of concern, the conference noted the restrictive- ness of the eligibility criteria to the facility and the length of the completion period. Regarding eligibility criteria, it was noted that some of the condi- tionalities may be difficult to fulfil and would significantly limit the number ofAfrican countries that could benefit from the Initiative. Also, the completion period was deemed to be too long, as the postponement of the completion date would result in lowering the extent of debt relief for the eligible countries. There was also uncertainty with regard to how many African countries would actually benefit from the facility as well as disbursement of IDA funds between the decision point and the completion point. Also, with regard to sustainability analysis, the Conference was of the view that the set range for the ratios criteria was rather restrictive and did not take into account specific country peculiarities. The concept of sustainability should, therefore, also encompass other elements that would ensure that countries benefitting from the Initiative would not backslide into debt problems.

The panel session on "Emerging Capital Markets: Challenges and Opportunities" centred on the deliberations of the two break-out sessions which focused on "Capacity Building in African Capital Mar- kets" and "Making African Capital Markets Attractive through Re- gional Stock Exchanges and Information Technology" which featured investment bankers and representatives of capital markets who made presentations relevant to Africa. The events were intended to fosterfrank and productive interaction between the Ministers and Central Bank Governors and investment bankers on ways of strengthening the momentum of estab- lishing and strengthening capital markets in Mrica.

African countries acknowledged the important role capital markets had played in other regions of the world in the mobilization of both domestic and external resources to support investment. Accordingly, concerted

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efforts were underway in many of these countries to strengthen such markets wherever they exist or establish them where they do not. The conference deliberated on issues relating to the expansion and deepening of capital markets in Africa as instruments for resource mobilization and allocation; the legal, regulatory and supervisory framework for the effective func- tioning of capital markets: and the role of regional capital markets,

The conference also deliberated extensively on the role of capital markets in generating venture capital. The presence of Chief Executives of African capital markets and commercial banks, international financial institutions, and experts from investment funds enriched the discussions of the conference.Itwas noted that renewed interest in Africa as an "investment address" had resu Ited in a number of African investment funds being es- tablished. Africa was called upon to take advantage of this new perception ofAfrica's investment potential and build upon it

Furthennore, the conference was infonned that the Economic Com- mission for Africa, in collaboration with the African Capital Markets Fo- rum and the United Nations Conference on Trade and Development, are currently preparing a comprehensive project designed to promote the development of capital markets in Africa. The African Capital Markets F0-

rum took the opportunity to brief the conference on the activities of the Forum in promoting African capital markets integration.

The conference adopted a "Declaration" and two "Resolutions" which are annexed to these Proceedings.

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I. Declaration and

Resolutions of the Conference

A. Addis Ababa Declaration of the African Ministers of Finance on Growth and Development Finance in Africa at the Turn

of the Century, Financial Sector Reforms and the African Debt Problem

Welthe African Ministers ofFinance gathered at Addis Ababa, Ethio- pia, from 31 March to 2 April 1997, for the Sixth Session of the Confer- ence of African Ministers of Finance, have reviewed the state of development finance, financial sector reforms and the African debt problem.

Within this contextl we have undertaken a constructive dialogue with our development partners on a number of developmental issues of importance to our continent.

Furthermore, we have reaffirmed our commitment to economic and financial sector reforms, and in collaboration with our development part- nerslto finding a lasting solution to the African debt problem.

The important issues discussed included the role of multilateralfi- nancial institutions and bilateral creditors in Africa's development; financial sector reforms and the development of capital marketsl within the framework of mobilization of resources needed to 'support Africa's development;

and the continuing debt problems of African countries.

We acknowledge that in view ofthe weakening of traditional sources ofdevelopment support and mechanisms for channelling financial aid, the conspicuous challenge that will face many of our countries will be finding substitute financing needed to spur growth and to reduce poverty_

We are aware that the challenging task of mobilizing domestic resources and attracting foreign investment will have to be intensified for gross domestic savings rates to be raised to higher levels needed to support a higher level of investment and growth. The need for reforming our financial sectors and developing viable money and capital markets has therefore to be perceived in the context of both raising domestic savings ratios

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and attracting foreign investment. Accordingly, the deepening and broadening of Africa's financial sector and development ofefficiently function- ing capital markets will need to be a major priority as Africa moves to the twenty-first century.

We acknowledge the role multilateral financial institutions have played in assisting Africa to mobilize resources required to support development and in undertaking economic and financial reforms. We urge them to continue to provide a greater proportion of the concessional finance and grants needed to support our infrastructural development and delivery of social services. We also call on them to assist Africa to build the appropriate capacities required for the continent to be able to attract non-debt creating resource flows.

We have also reviewed the African debt situation and noted with concern that despite notable efforts by African countries and the international community to reduce the burden of debt service for African countries, the stock of debt (in net present value terms) to exports ratio continues to increase. The stock of debt is estimated at US$340.5 billion at the end of 1996 and total debt service payments amounted to US$24.0 bill ion.

Itis in this context, that African countries have welcomed the Heavily Indebted Poor Countries (HIPes) Initiative launchedbythe World Bank and the International Monetary Fund in September 1996; more also that the Initiative for the first time has provided for rei ief on multilateral debt.

This Initiative is a partial reflection of the commitment of the international community to finding a lasting solution to the African debt problem.

However, the eligibility conditions and debt sustainability analysis for Heavily Indebted Poor Countries Initiative (HIPC) should be more flexible. The HIPC has targeted only 41 countries of which 33 are in Africa and it is possible that about halfmay benefit from the facility. With only 9 African countries from which data is available classified by the World Bank as relatively free of external debt problems and 32 classified as "severely debt distressed", the African debt problem will continue to stifle Africa's development and poverty eradication efforts.

We continue to be concerned that the magnitudes of the debt are obviously unsustainable. African countries continue to devote a large proportion of their resources to servicing their external debts, when their social sectors and infrastructures are in dire need ofrehabilitation and reconstruc-

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tion. We call on our development partners to assist the region in finding practical and lasting solutions to the twin debt and poverty problems.

We acknowledge that in the medium to long term, Africa's development will need to be enhanced by intensifying domestic savings mobilization and local investments efforts complemented by non-debt creating flows, including foreign investment. Itis in this respect, that many of our countries have put significant efforts to attract foreign investment, including comprehensive revisions ofour investment codes. Liberalized macroeconomic policies and political reforms currently being implemented are also intended to provide the necessary environment conducive to both local and foreign investment. We commit ourselves to continuing with these reforms and call on the donor community to support our efforts to attract foreign investment as well as opening up their markets to Africa's exports.

The challenges of globalization and liberalization of the world economy as well as financial markets dictate that our countries adapt rap- id Iy to these developments if our continent is to become an effective partner in the international economy. We are committed to the process of ensuring that Africa moves in that direction and call on the international community to supplement our efforts with significant resources and appropriate support.

B. Resolution on Growth and Development

Finance in Africa and Financial

Sector

Reforms

The Conference of African Ministers of Finance,

Aware ofthe importance ofthe financial sector in Africa, its fragile nature in most African countries, and the need to enhance its role both in the mobil ization ofdomestic and external resources,

Recognizing the importance of continuing with the implementation and deepening of financial sector reforms in many of our countries, the need for enhanced autonomy ofcentral banks and the importance for coordina- tion between monetary and fiscal policy,

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Noting the important role capital markets are playing in other regions of the world in the mobilization of domestic and external resources needed to support the development process and in attracting foreign investment, Conscious of the fact that a refonned, efficient and buoyant financial sector can substantially contribute to the development ofa country and its integration into international financial markets,

Aware ofthe importance ofmicro-financing to the alleviation of poverty in the region,

Recalling resolution annex II on the "Problematique offinancing the development process in Africa" adopted by the fifth session of the Confer- ence of African Ministers ofFinance in March 1994 in Libreville, Gabon, which called upon African countries to intensify efforts to improve the institutional framework needed for effective intenned iation in African countries and resolution 2(IV) on "The role ofindigenous banking and financial institutions in the mobilization of financial resources for development"

adopted by the fourth session of the Conference in December 1991 in Addis Ababa, Ethiopia,

Having reviewed the state ofdevelopment finance in Africa and noted the decline in traditional sources offoreign assistance to the continent and the need to find substitute sources offunding for their development process, Considering the dependency of the majority of African countries on external assistance and that official development assistance to African countries has in recent years either declined or stagnated in real terms,

1. Urges African countries to continue with their economic and financial reforms, with a view to achieving sustainable development for their economies and for their effective integration in the world economy and among themselves;

2. Calls upon African countries to implement appropriate measures to reduce gradually their heavy dependency on external financing and to improve mobilization ofdomestic savings and non-debt creating flows and to explore the potentials for privatization as a way of promoting the development of capital markets;

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3. UrgesAfrican countries to adopt internationally accepted best practices with regard to management, prudential supervision and regulation of their banks and non-bank financial institutions;

4. Welcomesthe steps taken by a number of African countries to improve the efficiency and transparency in the management of their money and capital markets and to create new ones where they do not exist;

5. Further calls uponAfrican countries to intensify their efforts in deepening and broadening and strengthening the process offinancial intermediation in their countries;

6. EncouragesAfrican countries to establish regional stock markets, particularly where individual countries lack the capacity to establish their own;

7. Appealsto the international community to step up significantly their financial support to African countries in the implementation of their economic and financial refonns ;

8. Further appealsto the international community to give all necessary financial support for the creation ofmicro-financing institutions;

9. Urgesthe Economic Commission for Africa, the Organization of African Unity and the African Development Bank to continue to assist African countries, in collaboration with other agencies including the United Nations Conference on Trade and Development, in their mobilization of domestic and external resources needed to support development, financial sector reforms and in the development oftheir money and capital markets.

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C. Resolution on the Debt Problem and its Impact on Africa's Development Process

The Conference of African Ministers of Finance,

Concernedthat despite notable efforts made by African countries to reform their economies and the support of the international community, the debt problem continues to be a major constraint on the economic and social development of many African countries,

Considering the amount of resources devoted by African countries to servicing their externa! debts which could be used for the development of their social sectors and improvement oftheir infrastructures,

Awareofthe impact of the debt overhang on the continenfs capabilities to attract non-debt creating flows, and in particular foreign direct investment, Notingthat official development assistance to African countries has either declined or stagnated in real terms,

Recallingresolution I(IV) on the "African debt problem" adopted by the fourth session of the Conference of African Ministers of Finance in De- cember 1991 in Addis Ababa, Ethiopia and resolution annex I on the "Treat- ment of the debt of African countries" adopted by the fifth session of the Conference in March 1994 in LibreviHe, Gabon as well as the declaration on "Africa's external debt" adopted by the ECA Conference of Ministers in May 1995 all of which urged African countries and their development partners to find a lasting solution to the problem within the framework of promoting sustainable development in Africa,

Further recallingthe various resolutions of African Heads of State and Government and the United Nations General Assembly on the same issue, Appreciativeofthe efforts ofthe multilateral institutions and the international community to assist in finding a lasting solution to this problem as partially reflected in the Initiative for the Heavily Indebted Poor Countries (HIPCs) launched in 1996 by the World Bank and the International Mon- etaryFund,

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Considering that a lasting solution to the African debt problem can be achieved in the context ofa broad framework of budgetary discipline and prudence, proper recording and development of debt management capacity, donor assistance and resetting national priorities and for providing significant resources to these countries which will assist them to achieve sustainable growth and development and thereby enable them to move out of the debt and poverty trap,

1. Calls upon African countries in collaboration with the international community and multilateral institutions to intensify their efforts to find a durable solution to the problem;

2. Commit ourselves to continue with economic and financial refonns, enhance our debt and macroeconomic management capacities and the exchange of infonnation on debt management, in order to contribute to the achievement of debt sustainability in our countries;

3. Urges the World Bank, the International Monetary Fund, the Afri·

can Development Bank and other multilateral institutions to exercise more flexibility in particular with respect to the stringency of the ratio of total debt in net present value terms to exports and give due consideration to the fiscal burden of debt in eligibility conditions for access to theillPCInitia- tive in order to allow as many refonning African countries as possible access to the facility;

4. Stresses the importance of advancing the completion point of the liPCInitiative for countries with demonstrated record ofstrong economic performance over a prolonged period;

5. Appeals to the non-Paris Club bilateral creditors to take effective measures to reduce the stock of debt of African countries owed to them;

6. Further appeals to the multilateral financial institutions and international community to continue to support African countries with concessional financing including grants necessary for them to accelerate the pace of economic and social development and rehabilitate their social sectors, especially education and health, and improve their infrastructures.

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II. Plenary Session on Growth and Development Finance in

Africa at the Turn of the Century: What Role for

Multilateral Financial Institutions

A. Presentations

1. Introduction by the Moderator:

Honourable Sufian Ahmed, Minister of Finance, Federal Democratic Republic ofEthiopia

This session was programmed to discuss the role of multilateral financial institutions in the context of the realities and challenges facing African countries at the tum ofthe century and beyond. Institutions such as the World Bank, IMF and the ADB are our principal development partners in Africa. They are closely engaged with us on policy dialogue and advice and the design of reform programmes.

As we move to the tum ofthe century, Africa faces many challenges as well as attractive opportunities. One of these challenges is the alleviation and ultimate eradication of poverty. According to the World Bank, the poor in Africa are estimated at 218 million or 47 per cent ofthe population in 1993. This figure is estimated to increase to 300 million by the year 2000.

There are also the challenges of integration in the world market within the context ofthe Uruguay Round agreements. The post-Uruguay Round trade regime supplements and supports domestic initiatives for creating market-based, private-sector driven economies, while the shift towards a more open space, free ofspecial considerations and arrangements, sharpens the challenge.

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Wh'iIe these social and economic conditions define the backdrop to the challenges we face, we are very much encouraged to note that the commitment of our governments, supplemented with the assistance of our partners, will be sufficient to attain and sustain a growth momentum, to make the transition to self-sustained development a distinct possibility in a short period oftime.

While the responsibility to develop and implement strategies based on the special needs and comparative advantages of each country should be assumed by each of our governments, bilateral donors, multilateral institutions and international agencies have a crucial role to play in supporting national initiatives with financial and technical assistance.

The dialogue with our major development partners should be predi- cated on fostering confidence-building and effective partnership for development. It is in this context that we have requested the distinguished panelists from the World Bank, the IMF and the ADB to share their perspectives with us on these issues as Africa enters the twenty-first century.

B. Panel presentations 2. Mr. Callisto Madavo, Vice President,

World Bank, Africa Region

Mr. Chairman,

Ladies and Gentlemen,

Itis a particular pleasure to be participating in this conference. We meet, in my view, at a time of great hope, opportunity and challenge for the way forward in Africa's development. A revival and renewal of African institutions is underway. With it, African leadership is setting the African strategic agenda for development. Indeed in ECA, under the leadership of Mr. Amoako, we witness a major turnaround. In the African Development Bank under the leadership of Mr. Kabbaj, we witness yet another major turnaround. And, of course, we know that at the country level, there is a renewal in the leadership both politically and economically. This, I think is a reason for hope.

But, there is another reason that gives impetus to hope and opportunity. First, the democratic opening that is taking place, led in the recent

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past~by the dismantling of apartheid in South Africa and _therefore~the restoration of the particular contribution that country can make to the de⁶ velopment ofthe subregion as well as to development ofAfrica as a whole.

I would like to suggest that the restoration of political stability, the opening up to civil society, greater participation by ordinary people in the development process auger well for the future. The sadfootnot~,ofcourse, is that we still have places in the Great Lakes subregion and in parts ofthe Hom that are mired in civil strife, and economic progress cannot take place.

There is a second reason for hope. Economic growth has resumed in Africa. In 1996, there was 5.6 per cent growth on the average, compared to 3.4 per cent in 1995 and compared to 0.9 per cent in 1994. Fully 31-32 countries have experienced positive per capita growth. The private sector is on the move and private flows are beginning to trickle back again into Africa. This is yet another reason for hope. This is yet another reason to see opportunities.

This said, all of us would agree that the gains, both economic and political, remain fragile. They need to be deepened, broadened and accelerated in order to lead to sustained progress. Today, some 580 million Africans, who constitute 10 per cent ofthe world population, produce only 1 per cent of its GDP. Today, as we speak, 260 million Africans live on less than $US 1:00 a day. This then is a graphic indication of the challenge against which African development efforts must be measured and against which the role of an institution like mine must be assessed.

Allow me then, Mr. Chairman, to tum to the Bank's role in light of this emerging hope and opportunity and indeed in light ofthe challenge that I have just laid out. The overarching objective of the Worid Bank should be to assist Africa to accelerate growth and poverty reduction. Africa should set ambitious targets for growth in the order of7, 8, 9 per cent and indeed, even double digit figures. Why not? With population growth rates at 3 per cent, if we are going to create the space to fight poverty in a meaningful way, we need to raise growth rates in Africa rapidly.

In my view, the Bank's role should revolve around 5 pillars:

First: Support of the emerging new style of African leadership, foster ownership and build capacity. Africans must lead and take full con-

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trol of their development agenda. Success stories must be built to boost

self~confidenceand make Africa "a good business address". The Bank cannot impose. The Bank should support. The Bank cannot "buy" reform. The Bank should support those countries that are committed to implementing significant economic reform programmes. This wi) l necessarily mean that the Bank has to be selective. It has to put resources behind those places where efforts are genuinely being made. This will mean that the Bank will necessarily have to support the efforts by Africa to build capacity and, in this context, we particularly welcome the initiative taken by the Finance Ministers, under the Partnership for Capacity-Build- ing which was presented to Mr. Wolfensohn last fall.

Second: Assistance to African countries to establish consensus within countries and with their partners for continuing economic reform, empha- sizing sound macroeconomic management, growth led by the private sector, rural development, investment in people's education and health and building ofstrong economic bases through regional and global integration.

We in the World Bank are actively searching for ways and instruments to support regional integration and to support the kind of regional integration thatwitJcreate platforms for Africa to compete globally. Under this vision and this view ofthe Bank's role, clearly, ideas are as important as money:

bringing to Africa global experience, encouraging networking among Afri- cans and indeed, networking between African and other developing countries about what works, what does not work, best practices and so on. In this way the World Bank would move more in the direction ofa knowledge bank.

Third: Building partnerships, because important as the WorId Bank is, it cannot go it alone. Itcannot do it alone. Ithas to work in partnership with others. We need to engage in wide consultations with governments, with beneficiaries ofour projects and programmes, with civil society, other donors, and the private sector. We need to collaborate more effectively with UN agencies such as we are doing under the UN Special Initiative that was launched by the Secretary-General in 1995. The key purpose of this move towards partnerships is for the Bank to listen and learn, for the Bank to leverage the contribution of its resources and expertise.

Four: Continuation of our role as a mobilizer of resources and a financier ofprogrammes and projects. As you all know, IDA is an important element ofthis contribution by the World Bank to Africa, and as you also know, IDA has been facing some difficulties in recent months.Itis

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important that success stories be built in Africa so that we have a basis on which Africans can play an advocacy role for development aid. We need to show that development aid works.

For your information, IDA has been committing something on the order of $US 2.5 billion a year to Africa. We can commit up to $2.7 or

$2.8 billion if we have the right instruments and the right projects. But perhaps some of you do not know that from our past commitments there remains undisbursed $8.5 billion ofcommitments to Africa, which means that in its role in Africa, the World Bank, working together with its partners, as I define them, has to focus on implementation, and getting the best out of the committed resources so that we can get results quickly and address poverty.

There are two other elements to this resource mobilization role by the Bank. As you know, we are chairing the Special Programmme of Assistance for Africa (SPA). We just launched in December, the fourth phase of the SPA, with resources indicated at $5 billion to assist economic reforms in Africa over the next three years. There is, of course, the HIPC Initiative about which my partner, Mr. Sarbib, will talk. So, the Bank needs to continue this resource mobilization role.

But I am really trying to say something else. In articulating these pillars around which the role of the World Bank should be seen, I am in fact trying to say that the role of the World Bank itself and the way in which it interacts with Africa has to change and is changing. What are some of the salient features of this change? First, there is greater client focus and responsiveness, including increased field presence.

For example, under our renewal programme, we have placed two of our country directors in Africa, one in Nairobi and one in Abidjan, and we intend, in fact, to move more authority and responsibility into the field.

So, you can expect more country directors to be placed in the field in the future. Allow me to move to my fifth pillar and to conclude with a few words on the financial sector.

Fifth: Support to trade, investment and domestic resource mobilization so that Africa can increasingly raise its own development finance and lessen dependency on aDA external resources, which have been declining anyway. What are the impIications of this? Itmeans then that the Bank has to be on the look out to improve access to export markets for

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Africa, by strengthening the African voice in the World Trade Organization (WTO) and in other forums where issues of trade are discussed. Itmeans that the World Bank has to work with African countries to create the environment forFDI,as ) phrased it in the beginning, to make Africa" a good business address".

For example, the fact that private capital flows to Africa are just about $12 billion, compared to $230 billion to all developing countries

ShOllId be a wake-up call to all of us. The fact that FDI to Africa is only about $2.6 billion, or under $3 billion, when total FDI to developing countries is on the order of$80 billion, should be a wake-up caB for all of us.

We in the World Bank need to support efforts in Africa to create the environment for greater private capital flows.

But trade and export earnings cannot substitute for domestic resource mobilization and domestic resource mobilization cannot happen effectively and efficiently without sound financial management systems, which is appropriately a theme ofthis conference. As many ofthese issues pertinent to the financial sector and debt management will be tackled by subsequent panels,I will confine my remarks to three points:

• The Bank stands ready to support financial sector refonns in Africa on a priority basis.Itis hard to see sustained growth without financial sector reforms.

• The Bank will put a lot of emphasis on micro-finance, which is key to rural development and we consider it central to development of African economies, particularly the rural sector.

• The Bank will seek opportunities to support efforts to develop regional financial markets as a key strategic agenda. Here we are lucky because we have examples, from the Central Bank ofCentral African States (BCEAC), from the Central Bank of West African States (BCEAO), from the Southern Africa Development Community (SADC) and others, where, infact~pointers are being put in place on how one might tackle the issue of regional financial markets and regional financial hannonization.

Mr. Chairman,

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15 I know that I have exactly a minute of my fifteen minutes and I want, if you will allow me, to end on the note that I started with. I began by saying we meet at a time of hope, that I see opportunity, and yet there are real challenges. But what is very encouraging about this conference and about developments in Africa is that, in fact, the utilization of platforms that are being created by this opportunity and this hope is beginning at home. Weare seeing a lot of developments in African countries. We are having conferences of the type that we are having today, which show us in fact that Africa is on the move.

Like Mr. Amoako, I am optimistic about Africa's future. I don't know about you, but I believe that we the World Bank can play more ofa supportive role, that Africans can lead and that Africa can continue to make progress.

I thank you, Mr. Chairman.

3. Mr. Ferhat Lounes, Vice President,

African Development Bank

Thank you Mr. Chairman.

In fact, after the intervention by my friend Madavo, I have very little to add because I am in total agreement with what he had to say about the roles of multilateral financial institutions and the responsibilities of the

• State. I would, however, like to make a few general observations.

The first, even ifit is commonplace, is thatit is extremely important , to participate intensely in the truly revolutionary changes taking place in

the world, that is, in balance with the world in which we live.

Often the observer cannot see the movement because he or she is a part of it. I believe that it is extremely important that Africa should make full use ofthis technological revolution in globalization ofintemational economic competition. At this stage, no ideological choice is involved, with regard to different models. The cholce is to adjust under the best condi-

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tions possible, that is, under those conditions which best protect Africa's interests and its ability to prepare for the future.

On another level, this change is affecting behavior internationally, particularly ratification of public capital flows. I believe all observers agree that this tendency is a sustainable one. The African continent remains the only region still dependent on such public flows, given the relatively low share of private flows it has been able to attract up to now.

It is extremely important that both beneficiary countries and MFls ask themselves how to maximize the use of resources under the best conditions possible; in other words, from the points of view of both MFls and borrowing countries, how best to ensure optimum rationalization and efficiency in resource utilization.

Finally, how to allocate resources to those key sectors that are best able to prepare Africa to face international competition under more accept- able terms. Naturally, these resources should continue to contribute to poverty alleviation efforts, including in the field ofeducation, because there can be no sustainable development otherwise. Since past efforts have not had significant results, clearly poverty will continue to be a major obstacle to development of the continent and its capacity to participate in these changes.

However, beyond all this, is the assurance that MFIs are partners, organizing their efforts to prepare Africa to overcome its handicaps, which include inadequate domestic management capacity, especially in the areas offinance, administration, institutions, macroeconomic management capacity, and development of domestic capacity to build partnerships for promoting a dynamic and capable private sector, able to take on foreign competition.

It would seem to me that the fundamental task in the coming decade for MFls, as Madavo said, is not only to furnish the necessary financial resources but also to provide and develop local expertise. Financial resources act as a force engendering additional resources sufficient for achieving the goal of an African economic revolution like that in place in other parts of the world.

Itis evident that MFIs themselves have to adjust and refonn. Such reform relates not simply to their role as partners but also to the institutions

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themselves. This is the explanation for the process developing inside the Bretton Woods institutions, as well as inside regional banks, including the African Development Bank. However, these institutions still have to show that they are the tools that can come together to support Africa through this phase of profound reforms, especially the IMF, which in recent years has been closely involved in a general way, with development assistance efforts in Africa.

Thisisall the more so since it is certain that with the developments in the rest of the world, increasingly, the other regions of the world will less and less seek the help of these institutions. Hence the need for the World Bank to concentrate its efforts primarily on Africa.

In this regard, it is interesting to note an important initiative that you yourselves recently launched, at your meeting with the Development Com- mittee of the World Bank, on capacity- building in Africa. ) believe this type of initiative underscores very clearly that it is Africans first who must state their priorities and problems, and should request MFIs to provide their financial resources, experience and technical capabilities, for enhancing human and institutional capacity, without which all reform efforts run the risk of remaining externally dependent, and therefore fragile.

Mr.Chainnan,

These are the few remarksIshall make at this stage. Ithink what is most interesting aboutthis typeof panel is not so much the brilliant state- ments delivered by the panelists, but the questions raised by the floor, to each of the panelists, asking details of how the MFls themselves propose to refonn their roles and mandates and adjust to the common needs and challenges ofthe various countries.

I thank you.

4. Mr Anapum Basu, Deputy Director,

Africa Department, International Monetary Fund

Mr.Chairman~

Honourable Ministers ofFinance Distinguished Delegates,

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Itis a great pleasure and honour for me to represent the IMF at this important meeting. The Managing Director of the Fund, Mr. Camdessus, has asked me to assure you of the great importance he attaches to the proceedings of this conference. I therefore see myselfas a listener. That is my main task for the next two days and today.

Nevertheless, today I would like to share with you some thoughts on how the Fund intends to strengthen its assistance to African countries in their efforts to attain sustainable growth and development and to alleviate poverty. First,Ishall make a few briefremarks on the situation as we see it today in Africa. Then, I shall focus primarily on the key aspects of macroeconomic and structural policies that are crucial to Africa's growth- oriented reform efforts, and on how the Fund expects to support them through its existing instruments ofsurveillance, and financial and technical assistance.

On the first point, I am in agreement with all previous speakers.

There is indeed an encouraging trend in many African countries. There is a revival of growth, the inflation rate is falling and underlying financial imbalances are narrowing, albeit gradually. In many African countries, strong and courageous efforts have been made to build a solid foundation for growth through the implementation of prudent macroeconomic policies andmarket-friendly structural refonns.

As the 1990s have progressed, we have seen encouraging signs ofa synergy between economic recovery and sound policies. The key challenge facing Africa today is to develop this emerging synergy into growing economic dynamism.

In trying to meet this challenge, it will be necessary for all of us to work together to ensure that economic policies are successfully focused on this challenge. There areanumber of ongoing and expected changes in the international economy, which previous speakers have already alluded to, soIcan briefly touch on them just in passing. They are, nevertheless, very important:

• There are more and more countries opening up their foreign trade regimes.

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.,

• There are more and more countries moving towards an increasingly broad-based liberalization of their exchange systems, including progressive capital account liberalization.

• With this opening up, as is to be expected, there are more and more countries responding to the globalization of markets for goods, services and financial capital, by reinforcing domestic macroeconomic and structural adjustment policies, in order to ensure competitiveness and achieve integration on both a regional and global basis. Like other developing countries, countries throughout Africa are, and will be increasingly seeking to open up their economies, and to broaden and deepen the linkages with their regional neighbours as well as with the international economy.

Aside from these major underlying trends in the global environment, there are two that I think have been mentioned by previous speakers, which carry the risk sometimes of weakening the adjustment efforts on the ground. These are unforeseen shortfalls in aid flows and unforeseen period ic exogenous shocks such as variations in the terms of trade and in weather conditions.

Therefore, African countries, as in the past, will have to adjust and meet these challenges as they come. Let me now touch on what the Fund will continue to do through its surveillance procedures. As you are well aware, we have two instruments, theWorld Economic Outlookand the Annual Article IV Consultation activities.

The World Economic Outlook is the vehicle for a systematic moni- toring and analysis of the global economic situation. It is here that we would focus on the implications for Africa of theWorld Economic Out- look forecast for growth in the industrial and the rest of the world in relation to commodity price forecasts, external terms of trade trends, developments in interest rates, financial flows in the international capital markets and prospects for world savings in official aid flows. All of these trends and developments form the basis for analysis in ourWorld Eco- nomic Outlook.

For the African countries, it will be, as in the past, vel)' important to do regular reviews ofthe balance-of-payments and external-debt situation, in the light of the emerging trends in the global economy_ Thiswillremain

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20

essential and will be followed up in the context oftheAnnualArticleIV ConsuItation.

TheArticleIV Consultation will also deepen and seek to learn more from the experience of the African countries on how to strengthen the foundations of higher-quality growth and how to avert or deal with potential crises arising from adverse shocks whichImentioned earl ier. It will remain the vehicle whereby we exchange views and share thoughts and candid assessments ofdomestic policies on a continuous basis; where we will share lessons with each other on the experience of policy refonn across the globe in different countries, including Africa. Itwould be the occasion for reappraising the external outlook each year.

Let me now tum to financing and support ofadjustment programmes.

The Enhanced Structural Adjustment Facility (ESAF) will remain the principle instrument for providing support for strong efforts on concessionaJ terms. As you know, the Fund has made major progress towards estab- lishing the ESAF as a permanent facility by the tum ofthe century. Through- out Africa and the world, the duration of the refonn process has varied from country to country.

Those emerging from contlict situations are at the start of the process, whiJe many of the countries that have enjoyed stable political conditions are at more advanced stages. For this reason, reform efforts will always reflect individual country circumstances and needs, to take account ofdifferences in institutional setting and in perceptions regarding the most urgent refonn priorities.

There are, nevertheless, a few general principles, and hereIwill be very brief, because previous speakers have mentioned virtually all ofthem.

Some macroeconomic policies focus on reducing public-sector defidts and on non-inflationary monetary policies. This will remain essential, simply because there will be a need to boost domestic savings and to support structural reform within a stable macro-environment. Structural reforms will also be important and the two key areas of structural reforms thatI would like to mention today are restructuring and privatization of public enterprises and development of a healthy and competitive domestic financial sector.

Both structural refonns and sound macroeconomic policies have inherent synergy, in the sense that structural refonns help to achieve mac-

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roeconomic stability and macroeconomic stability helps to make structural refonn implementation somewhat easier and more pennanent.

Let me touch on a third principle, which is the domestic incentive structure and regulatory environment. Other previous speakers have all mentioned the central ingredients of this enabling environment. Itincludes realistic exchangerates~interest rates, internal liberalization of"domestic prices, elimination oflabour-market rigidities, and, most ofall, is the sense of security that needs to be infused within the domestic economy.

Its domestic economic security also requires the transparent and equitably enforced regulatory framework, the sanctity of property rights, as well as the impartial enforcement of contracts and the reliability of public services. This then is the framework which has the best chance of bringing out the potential of the private sector.

Another point, the most important of all, is that governments need to focus more and more on expanding primary education and health-care services. On developing the rural sector's much-needed infrastructure and devoting resources to social safety nets to protect the poor from bearing a disproportionate burden of adjustment in the adjustment process.

Finally, and [think you will have occasion to discuss this tomorrow, the reduction of external debt obligations to a sustainable level. The two basic elements of this are:

• Adequate debt-reliefand concessional terms, including debt reduction under the HIPC Initiative; and,

• Sustained implementation of structural adjustment efforts, including strong policies to encourage vigorous private-sector growth.

Let me just mention one other initiative that has been gaining ground in Africa, regional integration. Here, I think, there are many subregional examples, including the West African Monetary Union (WAMU), the Cen- tral African Economic and Monetary Community, the Cross-Border [nitia·

tive for Eastern and Southern Africa and the Southern African Develop- ment Community (SADC), to name only a few.

By harmonizing and deepening economic and structural reforms within the framework of these regional organizations, many African coun-

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22

tri es have already begun the process of integration, that wi 11 facilitate their progress towards nondiscriminatory, multilateral liberalizations, and integration into the global economy. In brief, what I am saying, basically, is that regional integration could be viewed as a stepping stone, and as a tool for getting into the global economy and to more broad-based multilateral liberalization.

If I could now conclude with just a few thoughts on technical assistance. As you know, we have always focused on areas ofmacroeconomic policy, tax refonn, fiscal policy, areas of monetary policy instruments, financial statistics, and economic statistics. These will continue to be the areas in which we will assist our member countries in Africa and else- where. We hope to participate and cooperate also with regional training institutes in Africa and organize regional high-level seminars in Africa so as to bring together senior officials of African governments, to exchange views on policy issues of special relevance to the region and to draw on lessons from experiences in Africa.

In closing, let me say that Africa's accomplishments in recent years auger well for the future, The Fund remains steadfastly committed to helping its member African countries.

Build on this progress.

Thank you, Mr. Chairman.

B. Summary of discussions

In the plenary session"Growth and Development Finance inAf- rica at the Turn ofthe Century: What Role for the Multilateral Finan- cial Institutions?",the conference deliberated on the role ofMFIs in the context of the challenges facing African countries in attaining sustainable growth and development, reducing poverty and achieving equitable growth.

Presentations made by panel members centred around: current developments in resource flows to Africa; recent developments in Africa's socio- economic situation; the problems facing Africa in attracting non-debt creating resource flows, and in particular foreign investment and the role multilateral financial institutions can play in this respect; the problems relating to attaining sustainable development and poverty reduction; the mobilization of domestic and external resources; the African debt burden; and enhancing economic cooperation and integration in Africa.

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•

23 1. Financial resource flows to Africa

The conference noted that most African economies depend heavily on ODA which had been declining in real tenns over the past few years.

Measured in constant 1994 dollars, net ODA received by developing countries during 1986-1994 ranged between $USS3 to 61 billion. In the year 1996, it actually dropped. The same trend was observed with respect to grants and official credits which account for the bulk offoreign aid. They fell by an estimated US$l billion to 44 billion in 1996, representing a 3 per cent drop in real tenus compared to the 1990 levels.

In other developing regions, the decline in ODA has been compen- sated by the surge in foreign private capital flows. The developing world, as a whole, recorded flows of private capital amounting to $44 billion in 1990, which increased to $244 billion by 1996. However, Africa did not get its share of foreign private capital flows, as only 3 per cent was received by the continent. There is, therefore, need to explore avenues for reversing this trend. Africa will need to find ways of attracting foreign investments if the continent is to enter the twenty- first century with vibrant and viable economies. To this end, Africa should capitalize on the progress achieved during the past few years.

2. Africa's economic and social situation: Performance, outlook and prospects

The conference deliberated on Africa's socio-economic situation and prospects for African economies. Itwas also noted that there had been tangible progress in political refonns, indicated by a shift towards political pluralism in a number of countries: introduction of elected governments;

democratic opening up to civil society; as well as increased popular participation in political and economic activity. On the economic front, after many years ofeconomic decline, economic growth has resumed in Africa.

Growth rate of real GOP increased from 0.9 per cent in 1994 to 3.4 per cent in 1995. In 1996, it was estimated to have averaged 5.6 per cent. In 1996, thirty-one countries recorded positive per capita rea] GDP growth.

There had also been progress in economic stabilization. In many countries, the rate of inflation had decreased. For sub-Saharan Africa as a whole, overal.l fiscal imbalance declined from 9 per cent ofGDP in 1993 to Jess than 4 per cent in 1996. Likewise, the average external current account deficit, which stood at 5 per cent of GDP in 1994-95, was reduced to 2.5 per cent in 1996.

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These positive indicators could establish essential preconditions for the future development of capital markets in Africa. Investment funds being traded in New York and Europe have risen from scratch to over US$l billion in the past four to five years. There are also signs of growing interest in portfolio and foreign direct investment in Africa.

However, Africa's economic upturn and the interest being shown in its capital markets are fragile. The challenge to Africa and its development partners is to consolidate and buiJd on these recent trends to achieve sustained high growth rates.

3. Foreign investment flows to Africa: Challenges and opportunities

The conference noted that while there had been a significant increase at the global level offoreign investment flows, Africa has not been one ofthe major beneficiaries. On the contrary, the continent has not been able to attract enough foreign investment. This outcome was not what might have been expected from the analysis of rates of return on investment in Africa. In fact, according to the results of a recent study, on average, foreign investments in Africa yielded much higher net returns than in other developing regions.

During 1990-1994, they averaged 24 to 30 per cent, compared to an average of 16 to 18 per cent for all developing countries. Why then has Africa failed to attract foreign investment? The answer seemed to lie mainly on risk assessment of investment in Africa. Itappeared that investment in the continent was viewed as a high-risk activity due to a somewhat entrenched negative perception attached to African countries; perceptions of instability in political as well as economic policies, reinforced by famine and poor infrastructure.

In this context, The conference raised the fundamental question of what role MFIs could play in helping to change this perception of Africa and in improving the economic and social situation of the continent. The conference urged Africa's development partners to capitalize on the recent good performance achieved during the past few years to convince inves- tors of the viability of investments in Africa. To foster such an outtum of events, Africa and the MFIs needed to articulate the positive changestak- ing pJace on the continent and bring to light the huge economic potential existing in its countries. Moreover, simultaneous to the advocacy role for

..

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Africa's development, MFls have substantial capability to help African countries in the promotion of accelerated development through the mobilization of sufficient resources and implementation ofappropriate economic strategies and policies.

The conference observed that there was now encouraging evidence of the synergies between policy reforms and economic growth in Africa, and this underscored the importance of policy-making. Policy-making in- terventions by MFIs in Africa should, therefore, be viewed from two different perspectives. The first should focus on the economic policy framework and essential policy reforms. This view stressed the importance of a sound macroeconomic environment, the reduction of public deficits and the containment of inflation. It emphasized the necessity of structural reforms, particularly of restructuring the public sector and putting in place a competitive economic system. This view also underlined the conditions for motivation ofeconomic entities: realistic interest and exchange rates, flexibility in the labour market, and stability of the national economy. It attached particular priority to education and health sectors, rural areas and social protection of society's poorest.

The second perspective recognized the problems with policy formulation and thus focused on the process of consultation between MFls and African countries in policy-making. This view highlighted the need for ownership ofrefonn programmes by the African leaders, so as to strengthen existing capacities for policy formulation and implementation. This perspective underlined the building-up of internal and external consensus, the fostering of partnerships, and the promotion of a widespread exchange of ideas and experiences. Italso urged MFls to be more present in the field and to decentralize as much as possible their decision-making process.

The conference called on the MFIs to balance these two approaches care- fully in their intervention in Africa.

Trade and investment were agreed to be important areas in which MFls could help Africa in its development efforts. MFIs could assist in improving access to Africa's exports. Inrespect to investment, the critical contribution of these institutions would be in assisting African countries create an enabling environment for foreign investment. Additionally, MFIs could have a catalytic effect in bringing foreign investment to African countries. They could also have a significant role to play in domestic resource mobilization, enhanced through sound financial management and develop-

Financial sector reforms and debt management in Africa : volume one

EconomiC CommiSSion for Africa