Dec 112014

PRETORIA, South-Africa, December 11, 2014/African Press Organization (APO)/ — On December, 3, 2014, the Executive Board of the International Monetary Fund concluded the Article IV consultation1 with South Africa.

South Africa has made substantial progress in its first 20 years of democracy, achieving much improved living standards for its citizens. But growth has slowed in recent years, specifically relative to other emerging markets. Although weak trading partners’ growth contributed to the slowdown, increasingly binding structural constraints, such as protracted strikes and electricity constraints, have been important factors. Unemployment remains high at 25.5 percent.

Consumer Price Index (CPI) inflation declined to 5.9 percent in September after staying above the South African Reserve Bank (SARB)’s 3-6 percent band for six months, mainly driven by depreciation. The SARB has raised the repo rate by 75 basis points since January 2014.

South Africa’s twin deficits remain elevated. Despite a 26 percent real effective exchange rate depreciation since 2010, the current account deficit remains high (5.8 percent of Gross Domestic Product (GDP) in 2013), reflecting persistent competitiveness problems, soft terms of trade, supply bottlenecks, and subdued external demand. Notwithstanding expenditure discipline, the general government budget deficit was 4.5 percent of GDP in 2013, and public debt rose to 45 percent of GDP from 27 percent in 2008. In the recently-announced Medium-Term Budget Policy Statement, the authorities have announced that they will take measures to improve the public finances.

The Financial System Stability Assessment (FSSA) concluded that financial sector risks are elevated but manageable. The financial system is large, highly interconnected, dependent on wholesale funding, and credit risk is rising due to sluggish growth and tighter financial conditions. However, capital buffers are relatively high, financial regulation and supervision are strong, and capital controls limit liquidity risks.

The outlook is lackluster with considerable risks. Growth is projected to slow to 1.4 percent in 2014 and rebound only modestly to 2.1 percent in 2015 on improved industrial relations, while private consumption remains depressed under tighter financial conditions. Slowly easing infrastructure constraints and stronger external demand are expected to raise growth to 2.75 percent in 2016–19 but not enough to lower unemployment significantly. Fiscal and current account deficits are expected to fall moderately over the medium term. Inflation is projected to decline in 2015 on account of lower oil and food prices and tighter policies. Structural reforms are essential to generate more growth and jobs and to address the challenges of poverty, inequality, and unemployment.

Risks are tilted to the downside. A sharp surge in global financial market volatility could lead to capital flow reversals and trigger a disorderly adjustment in the current account deficit. Lower global growth and commodity prices, further delays in relieving electricity constraints, and more labor market disruptions are additional key risks.

Executive Board Assessment2

Executive Directors commended the authorities for the progress made in improving living standards and for maintaining macroeconomic stability in the last twenty years. However, against the backdrop of a weak external environment, the country is faced with the challenges from elevated external and fiscal deficits, rising public debt, and high unemployment and inequality. Directors agreed that strong and prudent policies and structural reforms are key to strengthening economic resilience, boosting inclusive and sustainable growth, creating jobs, and reducing poverty.

Given the risks facing the outlook and reduced policy space, Directors called for decisive structural reforms to unblock supply-side constraints, lift growth, and rebalance the economy towards exports and investments. They welcomed the ongoing infrastructure projects, especially in power supply, and encouraged greater private sector participation, supported by careful preparation and sound frameworks. Directors commended the government’s enhanced focus on implementing the National Development Plan and promoting SMEs. They recommended that high priority be given to enhancing productivity and competitiveness by accelerating product and labor market reforms, reducing skill mismatches, and normalizing industrial relations.

Directors welcomed the envisaged fiscal consolidation in the 2014 Medium-Term Budget Policy Statement, and highlighted that containing the wage bill and raising taxes will be essential. They noted that further adjustment may be necessary to stabilize debt over the medium term, and in this context, underscored the importance of focusing on growth-friendly measures, including improvements in spending efficiency. They welcomed plans to increase state-owned enterprises’ efficiency so as to limit contingent liabilities. A few Directors noted that a formal debt anchor could strengthen the fiscal framework.

Directors commended the South African Reserve Bank (SARB) for a finely balanced monetary policy stance. While recent declines in oil prices and the planned fiscal consolidation could allow the SARB to remain accommodative for some time, risks to the inflation outlook need continued careful monitoring. In general, Directors highlighted the importance of effective communication to help guide inflation expectations.

Directors viewed exchange rate flexibility and the favorable currency composition of external debt as effective buffers against volatile capital flows. To boost resilience, they generally encouraged the authorities to explore options to build reserves, while taking into account related costs. Directors noted the opportunities provided by robust growth in the rest of the continent and invited careful analysis of South Africa’s spillovers to the region and potential spillbacks.

Directors noted the findings that the financial sector remains sound but is subject to vulnerabilities. To strengthen the sector’s resilience, they encouraged timely implementation of the FSAP recommendations, in particular enhancing scrutiny of asset quality and liquidity risks, including through enhanced stress tests. Introducing deposit insurance and strengthening regulation of collective investment schemes could reduce liquidity risks and boost market discipline. Directors concurred that South Africa’s deep and highly interconnected financial system requires group-wide supervision and better coordination among regulators. Directors noted that more competition could improve financial access and lower intermediation costs.

Dec 112014

KIGALI, Rwanda, December 11, 2014/African Press Organization (APO)/ — On December 8, 2014 the Executive Board of the International Monetary Fund completed the second review of Rwanda’s economic performance under the program supported by the Policy Support Instrument (PSI)1 and also concluded the 2014 Article IV consultation2 with Rwanda.

The PSI for Rwanda was approved on December 2, 2013 (see Press Release No.13/483).

Following the Board discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:

“The Rwandan authorities are to be commended for their strong implementation of the economic program supported by the Policy Support Instrument, carried out against a challenging economic environment. Poverty has declined over time, economic growth has recovered since 2013, and inflation remains contained.

“Fiscal policies remain prudent and the objectives of the FY2014/15 budget are within reach. In the medium term, fiscal deficits are projected to decline with limited recourse to domestic financing. Strengthening the domestic revenue base is an important objective, including for reducing aid dependency, and the authorities should vigorously pursue improvements in revenue administration and tax policy improvements in agriculture, mining, and property.

“The central bank’s current monetary policy stance is appropriate in view of rising inflationary pressures and the more flexible monetary policy framework will serve to make monetary policy implementation more effective. However, stepped-up efforts are needed to better promote financial deepening and inclusion, including through implementation of the Financial Sector Development Plan, and to enhance domestic and cross-border financial supervisory and regulatory frameworks.

“The government has taken important steps to strengthen Rwanda’s debt management capacity and project implementation, including establishment of a Debt Management Unit. The available room to fund new infrastructure projects and maintain a low risk of debt distress is limited, and sensitive to changing economic circumstances. This requires consistent and prudent debt management, through exploring all available concessional financing options, private sector involvement and judicious use of non-concessional borrowing.

“Removal of remaining structural impediments to private sector investment will help foster greater regional integration and export diversification. Efforts are needed to strengthen the business environment, including by lowering business costs and reducing remaining trade barriers”.

The Executive Board also completed the 2014 Article IV Consultation with Rwanda.

Rwanda’s economic performance since the turn of the century has been remarkable. Strong policies have played a key role in maintaining Real Gross Domestic Product (GDP) growth at 7.8 percent on average since 2000, with significant poverty reduction. The economy is recovering from the disruptions induced by aid suspension through mid-2013, with growth bouncing back in the first half of 2014 and inflation well contained.

The fiscal deficit for the fiscal year 2014/15 continues to be in line with available resources. Tax revenue is expected to increase by 1 percent of GDP this fiscal year, bringing it to almost 16 percent of GDP. Continued efforts to mobilize more domestic revenue should allow Rwanda to reduce its reliance on donor resources and finance its ambitious development agenda.

The monetary stance has remained unchanged since mid-2014 and is consistent with the projected pick-up in inflation and improved growth outlook. The National Bank of Rwanda (NBR) has implemented a series of measures aimed at improving the transmission mechanism of monetary policy and allowed greater exchange rate flexibility to maintain reserves at adequate levels.

Growth in 2014 is expected to be about 6 percent, rising to the longer-term growth rate of 7.5 percent in the medium term. This reflects improved implementation of government projects and a rebound in agriculture because of favorable climatic conditions early in the year. Prospects in construction and real estate are also favorable. Inflation is projected at about 3 percent by end year, converging to the authorities’ target of 5 percent in the medium term.

In terms of risks, weather conditions and delayed project implementation would hinder growth prospects, and a protracted period of slower growth in advanced economies or a decline in commodity prices – minerals and traditional exports – would adversely affect exports.

Executive Board Assessment3

Executive Directors agreed with the thrust of the staff appraisal. They welcomed Rwanda’s continued strong performance under the PSI-supported program, which has led to progress towards macroeconomic stability; robust, sustained and inclusive growth; improved gender equity; and poverty reduction. Despite strong program performance and the favorable economic outlook, Directors noted the country’s vulnerability to external shocks and high aid dependency, and encouraged the authorities to sustain the reform momentum. They supported the creation of an enabling environment for successful economic transformation to a more diversified, private-sector-led growth strategy, through macroeconomic prudence and productivity and competitiveness-enhancing structural reforms.

Directors called for continued efforts to strengthen fiscal sustainability through enhanced revenue mobilization and reduced foreign aid dependency. They recommended improvements in tax administration and broadening the tax base with Fund technical assistance, including through tax policy measures in agriculture, mining and property. On the expenditure side, Directors welcomed the identification of specific contingent cuts for FY2014/15, which safeguard priority social spending, in the event of revenue shortfalls. They also encouraged ongoing efforts to strengthen public financial management.

Directors considered the current monetary policy stance appropriate in view of rising inflationary pressures. However, they encouraged the authorities to improve the effectiveness of the monetary transmission mechanism, through the development of deeper financial markets and new monetary instruments. Directors called for the implementation of the Financial Sector Development Plan, to further promote financial deepening and inclusion. They advised strengthening both domestic and cross-border financial supervisory and regulatory frameworks, and improving the AML/CFT regime.

Directors agreed that Rwanda’s real exchange rate remains broadly in line with economic fundamentals, and underscored the need to maintain exchange rate flexibility to reduce external imbalances and preserve foreign exchange buffers.

Directors welcomed the establishment of the new Debt Management Unit, and supported the authorities’ plans to develop the country’s project implementation capacity, guided by a well-prioritized and appropriately phased public investment plan. They noted the authorities’ commitment to fully explore concessional financing options and private sector participation, and called for careful management of non-concessional borrowing to mitigate rollover risks.

Directors advised the removal of remaining structural impediments to private sector investment, and encouraged greater regional integration and export diversification. They recommended improving the business environment, including by lowering business costs and reducing remaining trade barriers.

Dec 112014

KAMPALA, Uganda, December 11, 2014/African Press Organization (APO)/ — The Executive Board of the International Monetary Fund today completed the third review of Uganda’s economic performance under the program supported by the Policy Support Instrument (PSI).1 The Board’s decision was taken on a lapse of time basis.2

The PSI for Uganda was approved by the Executive Board on June 28, 2013 (see Press Release No: 13/239).

Real Gross Domestic Product (GDP) growth was lower than expected at the time of the second PSI review in fiscal year (FY) 2013/14, reflecting under-execution of externally-financed public investment and adverse impact on exports of slower growth in main trading partners. Inflation dropped to 1.8 percent in October from 5.0 percent in June 2014 owing to a sharp decline in food prices and slower economic activity, and the international reserve coverage increased to a high level of 4¾ months of imports. Growth is projected to increase in FY2014/15, supported by scaled-up public investment and a recovery in private demand as households and businesses start accessing bank credit.

Performance under the PSI-supported program remains satisfactory. In particular, the end-June targets for inflation and international reserves were met, the ceiling on government’s net domestic financing was observed, and the stock of government arrears was significantly reduced. However, the indicative target on tax revenue was missed reflecting lower growth and shortfalls in efficiency gains.

Uganda’s infrastructure investment needs remain considerable. The authorities plan to boost these investments amid stepped up efforts toward regional integration, the coming on stream of oil production, and actions to improve the business environment. The authorities have committed to base the revamped infrastructure investment program on a well-planned rollout strategy, which will include project selection on the basis of strong feasibility studies; and sequencing that takes into account the impact on debt sustainability and the absorption and implementation capacities of the economy. The plan to upgrade the capacity to appraise, analyze and implement investment projects is welcomed.

On the fiscal front, the overall deficit excluding the recapitalization of Bank of Uganda (BoU) increased from 3.4 to 4.1 percent of GDP in FY2013/14. Challenges in tax compliance resulted in lower-than-expected revenue. However, the recent elimination of many tax exemptions, if accompanied by strict enforcement by the Uganda Revenue Authority and enhanced compliance from taxpayers, would result in a welcome enhancement of tax revenues. Strict adherence to the approved budget and improvements in policy coordination would complement these efforts.

With regard to monetary policy, the BoU’s prudent stance has brought inflation to a four-year low, setting the conditions for some additional monetary easing provided that the inflation expectations are anchored and that fiscal risks are contained. Strong banking supervision and actions to remove banks’ structural rigidities and encourage financial deepening is expected to continue.

Efforts aimed at achieving successful East African Community economic integration, transparent and efficient management of the upcoming oil proceeds, appropriate implementation of the upcoming infrastructure projects, and further gains in public financial management are set to support the authorities’ medium-term objective of attaining inclusive growth and poverty reduction.

1 The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies (see Details on Uganda’s current PSI are available at

2 The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.

Dec 112014

NEW YORK, December 11, 2014/African Press Organization (APO)/ — The members of the Security Council have taken note of Saturday’s parliamentary vote of no confidence in the Prime Minister of the Federal Government of Somalia, and recent political instability in the country.

The members of the Security Council recalled their visit to Somalia, and that of the Secretary-General, during which both underlined the vital importance of a united political leadership in Somalia. The members of the Security Council expressed their concern at the recent political instability in Somalia, and its impact on peace and stability.

The members of the Security Council welcomed the resolution of the current political crisis through the proper Parliamentary channels. They commended the Prime Minister of the Federal Government of Somalia for his acceptance of the result, and recognised the positive contribution he and his government had made to peace, security and development in Somalia.

The members of the Security Council reiterated their support for fast implementation of ‘Vision 2016′. In that context they underlined the importance of the President swiftly appointing a new Prime Minister, and the subsequent rapid establishment of an inclusive and representative government. The members of the Security Council stressed that swift and sustained restoration of political stability is vital, at a time when operations against Al Shabaab continue, and when political progress, in line with ‘Vision 2016′, must accelerate.

The members of the Security Council underlined their concern that further political instability in Somalia could jeopardise progress made so far towards peace and security. The members of the Security Council underlined the importance of the new political leadership in Somalia focusing on priority areas, including resuming the implementation and review of the Provisional Constitution and the passage of key legislation to establish electoral institutions. In this context they also emphasised the importance of Somalia’s leaders, including the new government, developing effective mechanisms to prevent prolonged political crises in the future.

The members of the Security Council reiterated their full support to both the Special Representative of the Secretary-General Nicholas Kay and UNSOM, as well as to the Special Representative of the Chairperson of the AU Commission Maman Sidikou and AMISOM as they continue to deliver their respective mandates.

The members of the Security Council underlined their resolute support for the peace and reconciliation process in Somalia. The members of the Security Council recalled their significant support to the people and Federal Government of Somalia, including through the UN Assistance Mission to Somalia (UNSOM) and through the UN’s support to AMISOM.

Dec 112014

FREETOWN, Sierra Leone, December 11, 2014/African Press Organization (APO)/ — Racing to fact check an ominous spike in Ebola cases from the remote diamond district of Kono in eastern Sierra Leone, bordering Guinea, a World Health Organization rapid response team found a worse-than-expected scene. WHO and the U.S. Center for Disease Control (CDC) joined forces with the Sierra Leone National Ebola Response Center (NERC) and Ministry of Health and Sanitation (MoHS) to sound the alarm and are now rallying all-comers in a massive build up to contain this burgeoning Ebola outbreak which ran the risk of continuing to grow and remaining hidden as world attention focuses on urban centers.

“Our team met heroic doctors and nurses at their wits end, exhausted burial teams and lab techs, all doing the best they could but they simply ran out of resources and were overrun with gravely ill people,” explains Dr Olu Olushayo, WHO National Coordinator, Ebola Epidemic Response. “In districts like Kono, with moderate transmission confined to limited villages and chiefdoms, the best chance of eliminating transmission is through aggressive and comprehensive case investigation and contact tracing,” he said. Scattered villages in 8 of the 15 chiefdoms are affected.

Reacting on intel from the Ministry of Health of Sierra Leone, WHO sent a seasoned field epidemiologist to Kono 10 days ago to tease out whether reported Ebola cases told the whole story. Cases go unreported for a variety of reasons and are exacerbated when overwhelmed and under-resourced frontline workers are unable to reach remote areas to get the truth from reluctant villagers. The surveillance officers had no vehicles. WHO and CDC quickly sent more investigators and rugged trucks.

They uncovered a grim scene. In 11 days, 2 teams buried 87 bodies, including a nurse, an ambulance driver, and a janitor drafted into removing bodies as they piled up at the only area hospital, ill-equipped to deal with the dangerous pathogen. In the 5 days before the team arrived, 25 people died in the hastily cordoned off section of the main hospital serving as a makeshift Ebola holding center.

As of 9 December 2014, this district of over 350 000 people officially has 119 reported cases. Upon hearing the WHO findings, Dr. Amara Jambai, MoHS Director of Disease Prevention and Control harkened a local saying to describe what remains yet to be discovered, “we are only seeing the ears of the hippo.”

Help is arriving daily. The NERC and MoHS for the Government of Sierra Leone and UNMEER with WHO support are connecting ready-to-help partners with an all-out multi-agency response to critical needs on the ground. WHO field staff are sharing their expertise with surveillance investigators, community mobilizers, infection controllers, and coordinators. The doctors from Partners in Health and Wellbody Alliance who supported the overwhelmed holding center, are willing to stay on board to support care at the source in outlying health posts. The International Federation of the Red Cross will build a new Ebola Treatment Center on a tight timetable, while they disinfect the hospital with MoHS and create a temporary safe holding unit. The IFRC Kenema Ebola Treatment Center will take Kono patients until these solutions are in place. CDC has staff on the ground. UNMEER has lent it’s helicopters to the effort in support of the UN family (WHO, UNICEF, UNFPA, WFP, and others) engaged in building up capacity for staff and volunteers through training, materials and logistical support. International Rescue Committee is supporting infection prevention activities in the district. Funders such as DIFD and USAID are making much of the fast response possible. The race is on in this frontier fight against the virus, as Ebola responders dash to get ahead of the epidemic rather than chasing its tail.

Dec 102014

TOKYO, Japan, December 10, 2014/African Press Organization (APO)/ — 1. On December 9, the Government of Japan, with a view to preventing further spread of the Ebola virus disease in West African countries, decided to newly extend emergency grant aid …