Information about Sub-Saharan Africa África subsahariana
Chapter

I Overview

Author(s):
Amor Tahari, M. Nowak, Michael Hadjimichael, and Robert Sharer
Published Date:
October 1996
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Information about Sub-Saharan Africa África subsahariana
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Author(s)
Evangelos A. Calamitsis and Pierre Dhonte 

During the past two decades, sub-Saharan Africa has lagged behind other developing regions in economic performance. However, the important overall indicators of performance have masked wide differences among subgroups of countries in the region. On the whole, African countries that have effectively implemented comprehensive adjustment and reform programs have shown better results. The divergence in performance among the various country groups has primarily reflected differences in their policy response to the deterioration in the terms of trade, as well as in progress made toward promoting macroeconomic stability, improving external competitiveness, and alleviating structural and institutional impediments to private sector activity.

The adjustment experience of sub-Saharan Africa has demonstrated that to achieve gains in real per capita GDP an expansion in private saving and investment is key. Total and private saving and investment are still too low in relation to GDP to finance a satisfactory and sustainable expansion in output. Furthermore, in view of the modest share of foreign direct investment currently channeled to sub-Saharan Africa and of the need to reduce dependence on foreign aid, more resources required to boost economic growth will have to be generated by the domestic private sector. Thus, the domestic private sector is essential in accelerating output growth and narrowing the gap in per capita incomes relative to other developing countries.

Accordingly, public policies need to be aimed at creating an environment conducive to private sector development. A critical issue in this regard is the extent to which changes in public policies can effectively stimulate private saving and investment in the region.

The four papers presented below are part of an effort to examine this question. They comprise a cross-country analysis and three case studies. The cross-country analysis assesses empirically the role of public policies in stimulating private saving and investment in sub-Saharan Africa in 1986–92. This analysis reveals that (1) policies effective in stimulating private saving and investment include those that keep the rate of inflation low, reduce macroeconomic uncertainty, promote financial deepening, and lower the external debt burden, (2) measures that promote structural reforms and reduce the fiscal deficit (without lowering government investment) help to raise private investment, and (3) declines in government saving are only partially offset by increases in private saving.

The case studies discuss the experiences of three countries during periods of adjustment efforts: Ghana in 1983–91, Senegal in 1978–93, and Uganda in 1987–94. These papers were prepared in the course of the policy dialogue between the Fund and member countries; the first two were also part of a set of background studies to a recent wider survey of experience.

The three case studies show that while these countries have made considerable progress, they still have a long way to go. In Ghana, the economy could have benefited significantly more “if inflation had been brought under control and if a wider range of structural adjustment measures had been implemented earlier.” In Senegal, “economic growth has remained erratic and saving and investment ratios have been relatively low.” Finally, Uganda “still needs to raise both its domestic saving and its investment efforts and to rigorously pursue structural reform programs.” All this underlines the need to take fully into account the medium-term nature of the adjustment and reform process.

The overall message, nevertheless, is positive. All three case studies indicate that progress has been made in enhancing an efficient use of resources, while the uneven success in mobilizing domestic resources should be seen as a call for more sustained and consistent policies. Indeed, as brought out in the cross-country paper, public policies aimed at keeping the rate of inflation low, reducing economic uncertainty, and promoting financial deepening can have significant and positive effects on private saving and investment. Appropriate policies can improve growth prospects, provided programs are, from the start, firmly and constantly imbedded in a medium-term perspective.

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