(MONITOR UG) IMF boss cautions East African countries on monetary union
By George Omondi
Posted Thursday, January 9 2014 at 02:00
Monitor Correspondent
NAIROBI.
In Summary
The world financial body called the move “very ambitious” and prone to multiple challenges.
The International Monetary Fund (IMF) has asked East African Communicty (EAC) countries to tread carefully on their monetary union plan even as it offers to provide technical assistance for envisaged single currency. IMF managing director Christine Lagarde said the Monetary Union Protocol signed a month ago by the bloc’s heads of state is “very ambitious” and prone to multiple challenges ahead.
“The recently signed road map to East African monetary union is very ambitious. Don’t rush, take all the steps and learn from the mistakes of Europe and other monetary unions,” Ms Lagarde told a forum organised by Kenya Private Sector Alliance (Kepsa) in Nairobi on Monday.
“The EAC is lucky to have multiple lessons out there, the gaps and pitfalls of other monetary unions across the world that it can learn from,” she added.
In Europe, for instance, failure to provide European Central Bank with cross-border supervisory powers created loopholes that States such as Greece, Spain and Italy exploited to exceed sustainable borrowing levels, plunging the whole union into debt crisis.
“The regional monetary union will only hold when all the member States are able to respect and strictly observe the convergence criteria,” Ms Lagarde said. She becomes the second top-ranking IMF official to caution on the East Africa’s single currency plan. In between, the countries have to harmonise payment and settlement system as well as fiscal and foreign exchange policies by 2018.
Kepsa expresses optimism
On Monday, Kepsa members expressed optimism that integration of financial services would be much easier and faster in East Africa compared to experiences of other blocs.
“In East Africa, most of the financial transactions are already being conducted through mobile phones, the level of technology and innovation that the European Union did not have when it began to implement its monetary union,” Kepsa chairman Vimal Shah said.
In EAC where domestic saving pool is much smaller, the monetary union protocol envisages a Stabilisation Facility to be set up by 2022 to finance adjustment of weaker segments of the economy.
If followed to the letter, EAC will have its central bank and a single currency by 2024. or in 25 years since it revived its integration in 1999. It took the EU 40 years to achieve similar milestones.
About the EaC monetary union schedule
Under the East African Community monetary union schedule, Kenya, Tanzania, Uganda, Rwanda and Burundi hope to implement preliminary stages of integration in two years and build the fiscal foundation for a common currency in 10 years.
The preliminary stages—fully fledged customs union and a common market—have eluded the East African countries in the last 13 years of integration. The member states have also gone ahead to set fiscal and monetary convergence criteria to be achieved in the next seven years.
Each member state has undertaken to keep headline inflation below eight per cent, fiscal deficit at three per cent, gross public debts below 50 per cent and foreign reserve cover equivalent to four and ahalf months of domestic import, all by the year 2021.
2012 warning
In 2012, IMF deputy managing director Naoyuki Shinohara warned East African states against basing its single currency plan on EU experience. “The macro-economic landscape and risks between EU and EAC are potentially different,” Mr Shinohara said in a podcast message.
The message added: “The EU single currency plan provided members with access to very large internal and global pool of savings at low rates of interest that allowed some countries to sustain private sector imbalances for a long period of time.”
Labels: CHRISTINE LAGARDE, IMF, REGIONAL INTEGRATION, UGANDA
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(NEWZIMBABWE) Chinamasa back empty-handed from IMF
18/10/2013 00:00:00
by Gilbert Nyambabvu
COMMENT - Since Gilberg Nyambabvu has been created editor of NewZimbabwe.com, the headlines and tenor of the articles has become a lot more sensationalist, more subjective and far more pro-MDC partisan. Not a good change, for anyone who is interested in real news about Zimbabwe. - MrK
THE International Monetary Fund (IMF) will not be loosening its purse-strings for Zimbabwe any time soon, tresury chief Patrick Chinamasa revealed as he returned from meetings with the institution in the US.
“We still owe them money, and because of that they have put us under the staff monitored programme and they will not be giving us fresh money or new concessionary loans until we complete that programme,” Chinamasa said.
The IMF stripped Harare of its voting rights in 2003 and nearly ejected the country in a rare move for the Washington-based institution in 2006. The restrictions were imposed after Zimbabwe fell behind in repayments to the Fund.
But in June, ahead of fresh elections, the organisation said it would work with the country for the first time in more than a decade although ruling out new cash advances.
IMF managing director, Christine Lagarde, announced a Staff Monitoring Programme (SMP) for the country adding its successful implementation “would be an important stepping stone toward helping Zimbabwe re-engage with the international community."
Following his appointment as Finance Minister after the June 31 elections, Chinamasa said he would stick with the plan proposed by the IMF which is not a particular favourite of his boss, President Robert Mugabe.
The minister said he had urged a new approach for Zimbabwe during meetings with the IMF and other organisations in Washington.
“I held a number of meetings with the IMF, World Bank, the African Development Bank, African Export Import Bank, International Finance Corporation in Washington where I emphasised that the one size fits all solution has left Zimbabwe at a standstill position,” he said.
“I told them that unless they give us new money there will be no growth and no capacity to pay them. We need new investments in the country to boost our economy and capacity to pay them.”
While the former coalition administration managed to stop run-away inflation and stabilise the economy, little progress has been made in forcing meaningful recovery and growth with companies hamstrung by liquidity problems among a host of challenges.
Zimbabwe’s huge debt pile is also said
Said by whom? - MrK
to be preventing the country from tapping external financing.
According to the IMF, the country’s external debt reached $12.5 billion in 2012 with nearly half of the obligations, about $6.7 billion, in arrears.
Gee, I wonder if Section 4 (C) clause (2), of the Zimbabwe Democracy and Economic Recovery Act of 2001 would have anything to do with that:
SEC. 4. SUPPORT FOR DEMOCRATIC TRANSITION AND ECONOMIC RECOVERY.
(c) MULTILATERAL FINANCING RESTRICTION- ... the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against--
(1) any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or
(2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.
Clearly, Zimbabwe's debt has not been rescheduled for 12 years. - MrK
Labels: CHRISTINE LAGARDE, IMF, PATRICK CHINAMASA
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Annan urges fair taxation, corporate transparency
By Kabanda Chulu
Fri 21 June 2013, 14:01 CAT
FAIR taxation and corporate transparency will bring real benefits to millions of people in Africa, says former UN Secretary General Kofi Annan.
And IMF managing director Christine Lagarde says there is need to eliminate international tax avoidance and evasion which have become major risks to government revenue and threaten the credibility of tax systems in the eyes of citizens.
Welcoming the G8 commitments to promote fair and transparent tax systems, Annan, who is now chairperson of the Africa Progress Panel, said more work remains to be done on the issue of beneficial ownership.
"This is a tremendous breakthrough for fair taxation and corporate transparency that will eventually bring benefits for millions of people in Africa. I am delighted to see the G8 declare its commitment to establish the automatic exchange of information between tax authorities and to recognise that all countries must benefit from this exchange," stated Annan.
"G8 leaders have confirmed that it is not acceptable for global citizens to carry the cost of tax avoidance by multinational companies. However, more work now needs to be done to tackle beneficial ownership in order that resource-rich countries around the world can benefit fully from the resources beneath their soil."
Commending the G8 for including global taxation issues on its agenda, Lagarde emphasized the need to strengthen technical assistance to developing countries that should include measures that promote equitable and efficient tax systems as well as stronger tax administration.
"At a time when almost all governments need additional revenues, whether to deal with high post-crisis public debts or to finance critical investments in human development, combating tax evasion and addressing tax avoidance should top the list of potential revenue-raising measures," she said.
She also commended the G8 leaders for the 10 principles put forward in the Lough Erne Declaration.
"A commitment to fair taxes, increased transparency, and open trade will support the broader commitment to maintaining sound macroeconomic policies and restoring stronger growth and job creation," stated Lagarde.
"The IMF stands ready to work closely with its member countries including the G8 and other multilateral institutions on these important issues and challenges."
And the G8 have committed to boosting development efforts of African partners.
In a statement released at the closing of the Group of Eight summit, the G8 praised development efforts made by African citizens, governments and institutions.
"Africa is the next emerging continent, with a growing share of the world's trade, investment and economic output. We have an historical opportunity to work with our African partners to help promote inclusive and resilient growth in Africa, through greater transparency, improved infrastructure, better trade facilitation, the elimination of trade barriers and the manageme.
Labels: CHRISTINE LAGARDE, IMF, KOFI ANNAN, TAX EVASION
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COMMENT - Bonjour and as-salam alaykum indeed. The IMF is officially using foreign invasion to expand it's neoliberal policies.
Unleashing the Economic Potential of the Maghreb—the Role of Foreign Investment
By Christine Lagarde
Managing Director, International Monetary Fund
Nouakchott, January 9, 2013
As prepared for delivery
Bonjour, as-salam alaykum. It is a great pleasure to be here. Let me begin by thanking the governor of the central bank of Mauritania, Sid’ Ahmed Ould Raiss for convening this important conference. I would like to welcome the ministers and governors from across the Maghreb, as well as representatives from the private sector and donors.
We meet in the wake of the great Arab Awakening, that outbreak of social consciousness in which citizens from all across the region stood up and spoke out for greater dignity, greater opportunity, greater equity in economic life.
For that, we need the economy of the Maghreb to work for the people of the Maghreb. We need strong and sustained economic growth. Inclusive growth that is generous in sharing its fruits. Growth that produces enough jobs to satisfy the yearnings of the younger generation.
The old economic model was not up to the task. It failed to provide an enabling environment based on fairness and transparency where private enterprises could thrive.
So the Arab Awakening must also lead to a “private sector awakening”—unleashing the productive potential of the Maghrebian people and creating an environment that supports innovation, entrepreneurship, creativity, and jobs.
Foreign direct investment is a vital part of this strategy. It can kickstart growth and set in train a virtuous circle of higher productivity, enhanced economic diversity, and greater resilience against external turmoil.
This is why this conference is so important today. I would like to talk about two issues this morning:
* First, the current state of play of foreign investment in the Maghreb.
* Second, how greater openness and transparency can spur greater investment in the region.
1. Current state of play of foreign investment in the Maghreb
Let me begin with the current situation. Basically, the Maghreb has great potential when it comes to attracting investment. But it has not always lived up to that potential.
For sure, foreign direct investment flows have risen dramatically over the past decade—from $3 billion a year during the early 2000s to $12.3 billion in 2008, the eve of the crisis. But even this peak, at 3 percent of GDP, was lower than in other emerging regions of Asia, Latin America, and Europe. And that number has gone down to 6.5 billion dollars in 2011, less than 2% of GDP, which is not surprising given the recent period of instability in the region.
At the same time, investment was not diverse. Most foreign direct investment came from Europe—80 percent for Tunisia and 60 percent for Morocco, for example. And most of it—about 30 percent—went to energy and mining.
Clearly, there is some room to do better. The Maghreb is rich in resources and rich in the potential of its people. Just look at some of the advantages enjoyed by the region:
* It enjoys the advantage of location. It sits right next to the largest trade area in the world, the European Union, and is also on the doorstop of the bustling Middle East.
* It enjoys the advantage of a young population. Unlike so many other parts of the world, the Maghreb’s labor force is growing, and will be bountiful for years to come. Your greatest asset is your people.
* It enjoys the advantage of an educated population. The region has made great strides in improving school enrollment. The next step is to improve educational quality to make sure that people have the right skills for the right jobs.
I would add here that the Maghreb should continue to take steps to restore or maintain economic stability, which provides a solid foundation of certainty and predictability for the people who make investment decisions. Staying the course on sound fiscal and monetary policies and guarding against real exchange rate overvaluation is important.
The Maghreb is also taking steps to improve its investment climate and business environment. But this journey is far from complete. The region still has some way to go in removing remaining roadblocks so that the private sector can expand, invest, innovate, and create jobs. It needs to break down all vestiges of privilege and cozy connections and provide a level playing field for all.
How can the region make concrete progress in this area? Through regulation that makes economic sense and is impartial. Through better quality infrastructure. Through fair and predictable tax and customs administration. Through a strong, independent, and impartial judiciary. Through a financial system that supports productive activity and widespread access to credit.
By making progress in these areas, governments not only attract foreign investment, they earn the confidence of their own people.
2. How greater openness can spur greater investment
This brings me to my second area this morning—how greater openness in the Maghreb can entice more foreign investment into the region. Openness to the world, and all that it can offer. Openness to the region, and to the idea of a common destiny. Openness to new ways of thinking and acting.
Within this broad framework, I think there are three specific areas that need attention—greater integration, greater internationalization, greater diversification. Let me address each in turn.
Greater integration
First, greater integration. This is the reason for the creation of the Arab Maghreb Union and the reason we are here today. Integration must begin with more open foreign direct investment regimes, including in extractive industries. After all, these industries need continuous cutting-edge investment.
The whole region would benefit from becoming more open to itself—by knocking down barriers to trade and opening wide the doors of mutual gain. A Maghreb that allows a free flow of goods and services offers limitless possibilities of a market of over 80 million people.
It was Ibn Khaldun who said that “only tribes animated by a strong esprit de corps are able to live in the desert”. It is time to widen that esprit de corps to encompass the whole region!
Of course, this should go hand-in-hand with efforts to create a common set of trade and investment rules—this will help provide a better investment environment for those who service the Maghreb market and those who locate here to service outside markets.
Greater internationalization
My second point is greater internationalization. By this, I mean that small companies need to think big, national companies need to think international, domestic companies need to think of themselves as part of a wider region.
For when a Maghrebian company breaks through and achieves transnational status, this can help with investment all across the region. After all, the local company knows and understands the region well. It can share wealth, knowledge, and experience. Of course, to make this work, we need standard foreign investment rules across the region.
Think of some of the practical advantages that could come with this kind corporate integration. For example, countries with less advanced agro-business sectors—such as Algeria, Libya, or Mauritania—would benefit enormously from the knowledge and know-how that come with investment from Moroccan or Tunisian agro-business companies’ investment.
This kind of integration and internationalization could help the region take advantage of favorable geography. Maghrebian companies would have an easier time investing in sub-Saharan Africa. The region could even become an important trade and investment hub that bridges sub-Saharan Africa and Europe.
Greater diversification
The third aspect is diversification—in both sources and sectors of foreign direct investment.
For a start, the Maghreb should branch out and reduce dependence on Europe. I am really intrigued by the possibility of engaging the BRIC countries—Brazil, Russia, India, China—the new economic dynamos on the world stage.
To attract more investment from BRICS, Maghreb countries should of course continue to work on improving the investment climate and on upgrading skills and education. But governments can also be proactive in selling the many benefits of the region. You make your own futures.
Diversification also has another angle—developing new investment niches in new and dynamic sectors. Think beyond natural resources. Think about engineering, software development, computing. It is up to you to seize the initiative and step boldly into a new world of opportunities.
Conclusion
Let me conclude. I believe that the “private sector awakening” must be an integral part of the Arab Awakening. A new society needs a new economy.
And there is no better way to begin that new economy than through investment, by opening yourself up and tapping into the wisdom and resources of other countries and other regions.
Ultimately, it is about laying the groundwork so that every single person in the region can live up to their true potential. Again, it was Ibn Khaldun who said it best: “the welfare of the people is the best way to strengthen the empire”. We do not have empires any more, but the logic remains the same!
And let me assure you that the IMF will be there to help you along the way. We are deeply engaged with the countries of the Arab Awakening.
We are helping with advice across the region on how to secure stability, protect vulnerable people during the transition, and lay the basis for strong and inclusive growth. We are helping with our loans—we have committed 8½ billion dollars to Jordan, Morocco, and Yemen, and are in discussions with other countries. And we help countries like Tunisia and Libya with capacity building—creating the secure foundations of that new economy.
Through your efforts and your initiative, and with help from outside partnerships, I have no doubt that the Maghreb can succeed. You have laid the groundwork for the future; now you must continue to strive ahead. Do so in a spirit of openness.
Thank you.
IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs Media Relations
E-mail: publicaffairs@imf.org E-mail: media@imf.org
Fax: 202-623-6220 Phone: 202-623-7100
Labels: CHRISTINE LAGARDE, IMF, NEOCOLONIALISM
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IMF urges member states to focus on job creation
October 12, 2012
By NANCY MWAPE in Tokyo, Japan
THE International Monetary Fund (IMF) has called on its member countries to focus on creating conditions for growth that are more inclusive and generate jobs among young people.
Speaking at a media briefing during the IMF and World Bank annual meeting, the fund’s managing director, Christine Lagarde says there is need to support job-rich growth adding that the unemployment rates among young people are terrifying and unacceptable.
“We have worked long and hard over the years to prepare ourselves to be in position to provide better services, better surveillance to be fully equipped financially to respond to the demands of our membership.
“We really want, together with our members to go through what needs to be done, what action needs to be taken in order to make sure that recovery is really here for the longer term and is sustainable,” she said.
Ms Lagarde said there is a level of uncertainty that is hampering decision makers from investing, creating jobs and developing values, adding that the IMF is not expecting strong growth this year.
“Where should we see action, Certainly in Europe and more specific ally in the Eurozone, which is still at this point the epicenter of the crisis and where most urgent action is needed,” she said.
She also called on emerging markets to keep close watch on vulnerabilities, whether they are domestic vulnerabilities or external.
She said there is need for action that lifts the veil of uncertainty, adding that action is required for countries with the legacy of high debt.
Ms Lagarde said there is need for countries to face up to the fundamental issues of global imbalances that are widening as growth picks up.
Speaking at a separate briefing, World Bank president Jim Yong Kim said the bank’s job is to ensure that growth registered in developing countries in Asia and Africa over the last five years is not destroyed by further worsening in the situation.
“We are in challenging times. Food prices remain high and volatile, growth in high-income countries is weak, and developing countries which have been the engine of growth, will not be immune to the increased uncertainty in the global economy,” he said.
The World Bank has launched a global online conversation campaign dubbed “What Will it Take to End Poverty” as part of starting a dialogue around barriers and solutions to ending poverty.
Dr Kim said it is everyone’s job to have a catalytic effect on poverty adding that the bank wants to fight poverty and make a difference in history.
“It’s been my life’s work and I have worked in situations of great poverty and this organisation is embracing this fundamental mission…While I’m excited by how much the bank has changed around openness and results and accountability, I believe the bank can go further. We need to be more nimble and focused on delivery,” he said.
Labels: CHRISTINE LAGARDE, IMF, NEOLIBERALISM
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