IMF: It seems that most of the countries of sub-Saharan Africa were better prepared to handle the effects of this latest global economic crisis than previous crises. What’s made Africa more resilient this time around?
Sayeh: One key factor has been the considerable progress made by African countries beginning in the late 1990s and in the first decade of this century, in addressing their fiscal problems and reducing their fiscal deficits. When the crisis hit, despite the fact that many countries suffered from lower revenues as a result of the reduced demand for African exports, countries were able to sustain spending on key priorities.
Another factor was that inflation had come under control so they were also able to use interest rate policy and reduce interest rates as another means of mitigating the impact of the crisis. I would say finally that African countries did not begin to put up barriers and look inwards. Instead they continued to pursue policies broadly encouraging foreign investment and trade.
Related to your last point, Africa has been described as staying open for business during this latest crisis. Is that a view you would share?
Africa has made significant progress in charting the respective roles of the government and the private sector in African economies.
Beginning in the late 1990s and through the past decade, African governments have increasingly withdrawn from the economic sphere and left that space for the private sector. This, together with efforts to rein in fiscal deficits, stabilise African economies, and the introduction of policies more supportive of foreign investment has really helped. It’s been a very encouraging feature of African economies, this new openness to the private sector and this more level playing field for foreign direct investment as well.
South Africa is in its first recession since 1992. Is this mainly a cyclical rather than a structural downturn in Africa’s biggest economy?
Well, it is indeed cyclical. The recession in South Africa is, by and large, a reflection of the reduced demand for South African exports as the global crisis deepened. South Africa is now starting to recover in line with the global recovery. It is beginning to grow again. But the impact of the crisis has been devastating for many South Africans.
What has been the impact of the global financial crisis on Kenya?
Kenya had been emerging from a deep political crisis when the global recession hit. In addition to the impact of the recession and the impact on demand for Kenya’s exports, it was also faced with a drought that has meant significantly reduced availability of food, with some ten million people facing the prospect of hunger.
What then remain as Kenya’s main policy challenges?
The main challenge is to accelerate and deepen economic growth as a basis for reducing poverty in Kenya. And around that are a number of issues that would be elements of a comprehensive reform programme. These include more transparent management of budgetary resources, increased mobilisation of domestic revenues and improved spending priorities.
The Fund was able, as the crisis hit Kenya, to provide financing through the rapid access portion of the Exogenous Shocks Facility. The Fund stands ready to continue to provide support to Kenya’s efforts at reform. And so we’re looking forward to continued, deep dialogue with Kenya.
