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SA ECONOMIC GROWTH HIT BY MINING SECTOR

Posted on 14 May 2013 by Africa Business

Will the Chinese purchase divested mining interests?

South Africa’s economic growth is lagging somewhat behind that of its peers in the developing world. IMF forecasts for 2013 indicate that emerging and developing economies will grow by 5,5% while SA’s GDP is expected to grow between 2,5% and 3%.

Global ranking

Country Name

GDP in Millions of US dollars (2011)

27

South Africa

408,237

39

Nigeria

243,986

60

Angola

104,332

88

Kenya

33,621

105

Zambia

19,206

One of the key reasons for slower growth is SA’s foreign trade structure and reliance on Europe. President Zuma used the opportunity at the World Economic Forum in Davos earlier this year to ensure foreign investors that South Africa is on the right track.

2012 will be remembered for the negative impact of labour unrest and resultant production stoppages in the mining sector. Mining reduced GDP by 0,5% in the first three quarters of the year. This excludes the biggest slump in the sector during the fourth quarter 2012.

Other significant features of the growth slowdown in 2012 were the slowdown in household consumption spending, poor growth in private fixed investment spending and a slump in real export growth.

South African’s inflation rate slowed to a five-month low in January 2013 after the statistics office adjusted the consumer price basket while food and fuel prices eased. In December, the inflation rate fell to 5,4% from 5,7% Statistics South Africa stated.

Government cut the price of fuel by 1,2% in January 2013, as a stronger rand in the previous month helped to curb import costs. Since then, the currency has plunged 4,8% against the dollar and fuel prices are on the rise, with prices increasing in March by a further 8%, adding to pressure on inflation.

South Africa’s strengths

· South Africa is the economic powerhouse of Africa, leading the continent in industrial output and mineral production, generating a large portion of the continent’s electricity.

· The economy of South Africa is the largest in Africa, accounting for 24% of the continent’s GDP in terms of PPP, and is ranked as an upper-middle income economy by the world bank.

· The country has abundant natural resources, well developed financial, legal and transport sectors, a stock exchange ranked amongst the top 20 in the world, as well as a modern infrastructure supporting efficient distribution of goods throughout the Southern African region.

South Africa’s weaknesses

· South Africa suffers from a relatively heavy regulation burden when compared to most developed countries.

· Increasing costs for corporates with rising wages.

· Poverty, inequalities sources of social risk mixed with high unemployment and shortage of qualified labour.

Mining

Output in the mining sector remained weak in December with total mining production down by 7,5% y-o-y after falling by a revised 3,8% (previously -4,5%) in November. On a monthly basis production rose by a seasonally adjusted 1,2% compared with 12,0% in November. Non-gold output was down by 5,0% y-o-y, while gold production slumped by 21,2% in December. For the fourth quarter, total mining production fell by a seasonally-adjusted and annualised 4,6% q-o-q as output of most minerals dropped.

For 2012 as a whole, mining volumes fell by 3,1% after contracting by 0,9% in 2011. Mineral sales were down by 15,6% y-o-y in November after falling 13,7% in October. On a monthly basis sales rose by a seasonally-adjusted 2,3% in November, but sales were down by a seasonally-adjusted 10,2% in the three months to November after declining by 6,8% in the same period to October. These figures indicate that the mining sector is still reeling from the devastating effects of widespread labour strikes in the third and early fourth quarters.

Prospects for the mining sector remain dim as the industry faces headwinds both on the global and domestic fronts. Globally, commodity prices are not likely to make significant gains as demand conditions remain relatively unfavourable. Locally, tough operating conditions persist. Rapidly rising production costs, mainly energy and labour costs, are likely to compel mining companies to scale back operations or even halt them in some cases.

This will have a negative impact on production, with any improvements coming mainly from a normalisation of output should strike activity ease. These numbers, together with other recent releases, suggest that GDP growth for the fourth quarter was around 2,0%, with overall growth of 2,5% for the year as a whole. Overall economic activity in the sector therefore remains generally sluggish while upside risks to inflation have increased due to the weaker rand.

Retail

Annual growth in retail sales slowed to 2,3% in December from 3,6% in the previous month. Over the month, sales rose by a seasonally-adjusted 1,0%, causing sales for the last quarter of 2012 to decline by 0,2% following 2,1% growth in the third quarter.

As a whole, 2012 retail sales rose by 4,3%, slightly down from 5,9% in 2011. Consumer spending is likely to moderate during 2013 as weak consumer confidence, heightened worries about job security and high debt, make consumers more cautious about spending on non-essential items. The overall economic outlook remains weak and fragile, while inflation may increase due to the weaker rand.

Manufacturing

Annual growth in manufacturing production slowed to 2,0% in December 2012 from 3,7% in the previous month, versus the consensus forecast of 2,9%. The increase in output was recorded in seven of the ten major categories. Significant contributions came from petroleum, chemical products, rubber and plastic products. Over the month, total production fell by 2,2% on a seasonally adjusted basis following a 2,6% rise in November.

On a quarterly basis, however, production improved by 1,6% in the final quarter of 2012 following two quarters of weaker growth. Both local and international economic conditions are expected to improve only moderately during 2013. A weak Eurozone will continue to hurt the large export-orientated industries.

The recent recovery in infrastructure spending by the public sector will probably support the industries producing capital goods and other inputs for local projects. But the growth rate will be contained by slower capital expenditure by the private sector in response to the bleaker economic environment both locally and internationally.

Therefore, while a moderate recovery in manufacturing production will continue in 2013, no impressive upward momentum is expected. Overall economic activity remains generally sluggish while upside risks to inflation have increased due to a weaker rand.

Infrastructure

A new economic plan, the National Development Plan (NDP), is likely to be adopted in 2013 promoting low taxation for businesses and imposing less stringent employment requirements. This a measure that the ANC is pursuing ahead of the 2014 national elections. The NDP will encourage partnerships between government and the private sector, creating opportunities in petrochemical industries, metal-working and refining, as well as development of power stations.

Construction companies are especially likely to benefit from government plans to invest $112-billion from 2013 in the expansion of infrastructure as part of the NDP. Some 18 strategic projects will be launched to expand transport, power and water, medical and educational infrastructure in some of the country’s least developed areas.

Energy companies will also benefit, following the lifting of a moratorium on licences for shale gas development. Meanwhile, there will be significant opportunities, especially for Chinese state-owned enterprises that have recently made high-profile visits to South Africa, to acquire divested assets in the platinum and gold mining sector as large mining houses withdraw from South Africa.

According to government reports, the South African government will have spent R860-billion on new infrastructure projects in South Africa between 2009 and March 2013. In the energy sector, Eskom had put in place 675 kilometers of electricity transmission lines in 2012, to connect fast-growing economic centers and also to bring power to rural areas. More than 200 000 new households were connected to the national electricity grid in 2012. Construction work is also taking place in five cities including Cape Town, Port Elizabeth, Rustenburg, Durban and Pretoria to integrate different modes of transport.

Business Climate

Due to South Africa’s well-developed and world-class business infrastructure, the country is ranked 35th out of 183 countries in the World Bank and International Finance Corporation’s Doing Business 2012 report, an annual survey that measures the time, cost and hassle for businesses to comply with legal and administrative requirements. South Africa was ranked above developed countries such as Spain (44) and Luxembourg (50), as well as major developing economies such as Mexico (53), China (91), Russia (120), India (132) and Brazil (126).

The report found South Africa ranked first for ease of obtaining credit. This was based on depth of information and a reliable legal system.

Foreign trade

SA’s trade deficit narrowed to R 2,7-billion in December from R7,9-billion in November on account of seasonal factors. The trade balance usually records a surplus in December due to a large decline in imports. Exports declined 9,8% over the month. The decrease was mainly driven by declines in the exports of base metals. Vehicles, aircraft and vessels (down R1,1-billion), machinery and electrical appliances (down R0,9-billion) and prepared foodstuffs, beverages and tobacco (down 0,8-billion). Imports dropped 15,8% m-o-m.

Declines in the imports of machinery and electrical appliances (down R3,3-billion), original equipment components; (R1,8-billion), products of the chemicals or allied industries (R1,5-billion) and base metals and articles thereof (R1,2-billion) were the main drivers of the drop.

The large trade deficit for 2012 is one of the major reasons for the deterioration in the 2012 current account deficit forecast to 6,2% of GDP from 3,3% in 2011. South Africa’s trade performance will remain weak in the coming months on the back of unfavourable global conditions and domestic supply disruptions. Weak global economic conditions will continue to influence exports and growth domestically.

Skills and education

The need to transform South Africa’s education system has become ever more urgent, especially given the service delivery issues that have plagued the system. While government continues to allocate a significant amount of its budget to education (approximately 20%), it has not been enough to transform the schooling system. Coface expects the government to continue to support this critical sector, but that an opportunistic private sector will take advantage of government inefficiencies.

South Africa’s education levels are quite low compared to other developed and developing nations. South Africa began restructuring its higher education system in 2003 to widen access to tertiary education and reset the priorities of the old apartheid-based system. Smaller universities and technikons (polytechnics) were incorporated into larger institutions to form comprehensive universities.

Debt

The total number of civil judgments recorded for debt in South Africa fell by 9,8% year on year in November 2012 to 35 268, according to data released by Statistics South Africa. The total number of civil judgments recorded for debt decreased by 15,2% in three months ended November 2012 compared with the three months ended November 2011.

The number of civil summonses issued for debt fell 23,9% year-on-year to 70 537. During November, the 35 268 civil judgments for debt amounted to R414,1-million, with the largest contributors being money lent, with R142,5-million. There was a 21,9% decrease in the total number of civil summonses issued for debt in the three months ended November last year compared with the same period in 2011. A 23,9% y-o-y decrease was recorded in November.

South Africa maintains respectable debt-to-GDP ratios, although these grew to 39% of GDP by end-2012, substantially higher than the 34% for emerging and developing economies as a whole. When Fitch downgraded SA earlier this year, it specifically mentioned concerns about SA’s rising debt-to-GDP ratio, given that the ratio is higher than the country’s peers.

South Africa is uniquely exposed to foreign investor sentiment through the deficit on the current account combined with liquid and deep fixed interest markets. SA’s widening deficit on the current account is a specific factor that concerns the rating agencies and is one of the metrics the agencies will use to assess SA’s sovereign risk in the near future. Further downgrades are the risk – potentially driven by foreign investor sentiment about political risks.

Political landscape

Persistent unemployment, inequality and the mixed results of BEE (Black Economic Empowerment) intended to favour access to economic power by the historically disadvantaged populations have led to disappointment and resentment.

Social unrest is increasing. Recent events weakened the ruling coalition which came under fire for its management of these events. Tensions could intensify in the run up to the 2014 presidential elections. South Africa has a well-developed legal system, but government inefficiency, a shortage of skilled labour, criminality and corruption are crippling the business environment. South Africa also has a high and growing youth unemployment, high levels of visible inequality and government corruption so we would keep an eye on the escalating service delivery protest trends.

Labour force

The unemployment rate fell to 24,9% in the fourth quarter of 2012 from 25,5% in the third quarter, mainly reflecting an increase in the number of discouraged work seekers. Over the quarter, a total of 68 000 jobs were lost while the number discouraged work seekers rose by 87 000. The formal non-agricultural sector lost 52 000 jobs over the quarter, while the informal sector, in contrast, employed 8 000 more people. The breakdown shows that the highest number of jobs were lost in the private households category (48 000), followed by the trade and transport sectors, which shed 41 000 and 18 000 jobs respectively.

The agricultural sector led employment creation over the quarter, adding 24 000 jobs. Both local and international economic conditions are expected to improve only moderately during 2013.

Weak confidence and high wage settlement will make firms more cautious to expand capacity and employ more people this year. Government is likely to be the main driver of employment as it rolls out its infrastructure and job creation plans. The unemployment rate will therefore remain high in the short term.

Although the reduction in the unemployment rate is good news, it mainly reflects the large number of discouraged work seekers. Overall economic activity remains generally sluggish while upside risks to inflation have increased due to a weaker rand. Coface believes that this will persuade the Monetary Policy Committee to keep policy neutral over an extended period, with interest rates remaining unchanged for most of 2013. A reversal in policy easing is likely only late in the year or even in 2014.


 


Issued by:                                                                              Sha-Izwe/CharlesSmithAssoc

ON BEHALF OF:                                                   Coface

FURTHER INFORMATION:                                  Charles Smith

Tel:          (011) 781-6190

Email: charles@csa.co.za

Web:       www.csa.co.za

Media Contact:

Michele FERREIRA /
SENIOR MANAGER: MARKETING AND COMMUNICATION
TEL. : +27 (11) 208 2551  F.: +27 (11) 208 2651   M.: +27 (83) 326 2268
michele_ferreira@cofaceza.com

 

BUILDING D, DRA MINERALS PARK, INYANGA CLOSE

SUNNINGHILL, JOHANNESBURG, SOUTH AFRICA
T. +27 (11) 208 2500 –
www.cofaceza.com

About Coface

The Coface Group, a worldwide leader in credit insurance, offers companies around the globe solutions to protect them against the risk of financial default of their clients, both on the domestic market and for export. In 2012, the Group posted a consolidated turnover of €1.6 billion. 4,400 staff in 66 countries provide a local service worldwide. Each quarter, Coface publishes its assessments of country risk for 158 countries, based on its unique knowledge of companies’ payment behaviour and on the expertise of its 350 underwriters located close to clients and their debtors. In France, Coface manages export public guarantees on behalf of the French state.

Coface is a subsidiary of Natixis. corporate, investment management and specialized financial services arm of Groupe BPCE.. In South Africa, Coface provides credit protection to clients. Coface South Africa is rated AA+ by Global Ratings.

www.cofaceza.com

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Year of the Artisan: Artisans needed to help grow the economy

Posted on 30 April 2013 by Africa Business

African Education Week to gather experts in Johannesburg in June

South Africa has a shortfall of about 40 000 skilled artisans and industries often have to import migrant workers at exorbitant costs.

In a recent speech, the South African Minister of Higher Education, Mr Blade Nzimande, quoted this figure when he opened a technical training academy in Cape Town.  Those involved in training artisans therefore rejoiced when Nzimande in March declared 2013 the Year of the Artisan.

“The Year of the Artisan is good news for the industry because we need to seriously focus on training people for the trades,” says Mr Sam Zungu, principal of the Umfolozi College, an institution for further education and training (FET) with five campuses in KwaZulu-Natal.

“Young people need to be made aware of the great need for skilled people. This country needs artisans across the board in fields such as electricity, plumbing, fitting and turning and mechanisation. The biggest need is in the energy sector where we need skilled people to maintain and build infrastructure.”

He continues:  “Eskom is battling and new power plants are being erected.  But we do not have a big enough pool of skilled people to draw from locally for these projects. We are moving towards the same situation as before 2010 when the country had to import artisans to work on the stadiums and infrastructure needed for the Soccer World Cup.”

The Year of the Artisan dovetails neatly with the South African government’s National Development Plan (NDP). This plan focuses on reducing poverty and inequality by 2013 and crucial to attaining to these goals is the stated aim of training at least 30 000 qualified artisans annually.

African Education Week
Sam Zungu is chairing a panel discussion on the future of FET Colleges during the upcoming African Education Week at the Sandton Convention Centre in Johannesburg from 19-22 June.

He explains that while artisans can earn quite high salaries, there is still a stigma attached to the trades which also impacts negatively on how the Further Education and Training (FET) colleges are viewed.

“We need to change perceptions and we need to create an awareness of the opportunities for artisans.  There are many opportunities for skilled people to become entrepreneurs thus creating work opportunities for others.”

South Africa needs specialist artisans
Another speaker at African Education Week, Wilson Nzimande, head of Imithente, an education and business consultancy, cautions that South Africa needs specialist artisans – amongst others in the maritime fields. Over 90% of South African trade takes place via the oceans.

“Many people want to train as, for example, general electricians or mechanics. But we need specialists – we need divers who can do specialist welding and painting underwater and we need ship building specialists.  In many fields South Africa relies on foreigners and this is not an acceptable strategy.  We need to develop artisans because they are incredibly important in helping to grow developing countries economically.”

He emphasises that strategic partnerships need to be formed between training institutions, government and the private sector.

“In this Year of the Artisan we need more than just words and rallies. We need a particular programme of action. This means that government should do more to structure incentive mechanisms to the benefit of all parties.”

Too much emphasis on university degree
Horst Weinert, managing director of Festo Didactics, says there is concern that the average age of South African artisans is 50.

“These people will soon be retiring and there will be few to take their place if we do not train enough people to fill their shoes.”

University educated Weinert believes there is too much emphasis on a university degree:  “there are about 800 000 university students and 600 000 students at universities of technology and only between 100 000 and 200 000 at FET colleges. This pyramid is the wrong way around. We need more enrolments at FET colleges.”

According to Weinert, artisans can demand monthly salaries of up to R50 000 and more.

“Highly skilled artisans are in short supply and those who can deliver the goods can basically determine their own salaries.”

His advice to people who are set on obtaining a university degree in fields such as engineering is to enrol at an FET college for at least one year.

“This practical training obtained at a FET college will enable the student to fly through university.”

Although the trades are dominated by men, Weinert says there are many opportunities for women in field such as fitting and turning, instrumentation mechanisation and mechatronics – a multidisciplinary field of engineering which combines mechanical, control, electrical and computer engineering.

“I am a huge supporter of competitions like WorldSkills International (previously known as the Skills Olympics). There top artisans from different countries compete against each other. These competitions set benchmarks. The winners are highly regarded and others look up to them as leaders and innovators in their field.  This can act as inspiration for young people to train as artisans. When magic is created productivity is boosted and this in turn boosts the economy,” says Weinert.

Highlights from African Education Week
The African Education Week Convention and Learning Expo is the meeting and trading platform for everyone who is passionate about improving the standard of education in Africa.  Now in its 7th year, it remains the continent’s leading educational resources and training event, attracting more education professionals than any other event.  The co-located Career Indaba attracted m
ore than 4000 learners last year.  The expo aims to bridge the gap for students between studying and entering the world of work.

Highlights of the African Education Week programme on Further and Higher Education:

· Panel discussion:  The turnaround strategy for FET Colleges:  Creating institutions of choice

o Chairperson and panelist:  Sam Zungu, CEO, Umfolozi College, South Africa

o Panelist:  Dan Nkosi, CEO, South West College, South Africa

o Panelist:  Wilson Nzimande, CEO, Imethente, South Africa

· Panel discussion:  Strategies to equip learners with the skills to build their own future in tomorrow’s world

o Chairperson:  Amanda van der Vyver, Centre for Prospective Students, University of Stellenbosch, South Africa

o Do we equip learners for the workplace? The solution to take education to the next level
Elaine van Rensburg, MD, Compass Academy of Learning, South Africa

o Developing an extended curicula for NCV L2
Gert Hanekom, Manager, Centre for Teaching and Learning, University of the Free State, South Africa

o Aligning courses with the needs of the workplace
Mziwakhe Ramos Sibuqashe, Centre for Curriculum Development, Central University of Technology, Free State, South Africa

o Entrepreneurship Education in Secondary Schools in Mauritius
Dr Sheik Abbass, Lecturer, Business Education Department, Mauritius Institute of Education, Mauritius

Event dates:
Wednesday, 19 June 2013: Preconference workshops
Thursday, 20 June 2013:  Opening keynote session, Learning Expo opens
Friday, 21 June 2013: Conference sessions, Learning Expo open
Saturday, 22 June 2013: Learning Expo open, Post conference workshops

Location: Sandton Convention Centre, South Africa
Websites: www.educationweek.co.za ; www.careerindaba.co.za

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MTN Uganda successfully launches 4G LTE Network in Uganda making it the first in East Africa

Posted on 27 April 2013 by Africa Business

MTN has become the first operator in Uganda, and one of the very first in the region and on the African continent to successfully launch its 4G LTE network.

Long Term Evolution technology (LTE) is the latest technology in the world with the fastest internet speeds of up to 100Mbps, giving customers the most seamless experience in data services.

Popularly known as 4G, LTE is a ‘standard for wireless communication of high-speed data for data terminals and mobile phones.’ 4G LTE Data Networks provide mobile ultra-broadband internet access.


“We are happy to claim another first in Uganda with this momentous announcement as MTN Uganda successfully launches its 4GLTE network offering World-class internet services to our customers. What is even more pleasing is that we’ve done this ahead of many other advanced economies around the world,” said Ernst Fonternel, MTN Uganda’s Chief Marketing Officer.

The launch of LTE represents a major stride in mobile connectivity capabilities in Uganda. The service offers almost triple the speed of any existing mobile connection available commercially in Uganda and in the region.

“This launch further emphasizes MTN’s commitment in not just transforming its own network but also the businesses of its Corporate and SME customers while contributing positively to the overall development of the ICT sector in Uganda,” Fonternel added.

For the customer this means you can download large files in no time, stream music videos and HD movies without buffering and upload pictures without delay. These services will significantly transform the way you interact with the world.

“The higher LTE speeds will give our customers lower latency which translates into a much more stable user experience. The technology’s impressive speeds create endless possibilities for the user including instantaneous music and picture downloads,” said Fonternel.

“Our challenge isn’t keeping ahead of the other operators. It’s keeping ahead of the tidal wave of data demand both in our country and in the region. Last year we launched our 21.6Mbps Data Network and last month we rolled out our 42Mbps Data Network and now LTE. In all these innovations, we have been the first, and our intention is to continue pushing boundaries so that our customers enjoy World-class internet.”

MTN’s LTE service will initially be available in greater Kampala, with other towns to follow in the very near future. There are currently 20 locations fully integrated onto the LTE network. Furthermore LTE capable dongles will be on sale at selected MTN outlets.

Fonternel said that the commercial launch of LTE is part of a bigger network transformation plan that MTN has been undertaking over the past few years in order to give its customers World-class services.

Over the last two years, MTN has made major investments to its data infrastructure in Uganda, expanded the mobile distribution foot print, and greatly enhanced the mobile core, radio capacity and Network infrastructure.

MTN Uganda launched the first Mobile Money service in Uganda with tremendous success and was recently ranked 2nd in the world-wide sample for the number of active Mobile Money accounts as per GSM Association’s 2012 Survey.

MTN Uganda was also recently named Uganda Number 1 Leading Superbrand and was voted as the Best Mobile Telephone Service provider of the year in the Uganda Responsible Investment Awards 2013. MTN was voted for by the people of Uganda in appreciation and recognition of its contribution towards the promotion of international best practices and standards.

“MTN’s vision is to lead the delivery of a bold, new Digital World to our customers. MTN Uganda is embracing this vision through constant enhancements to our Data Network to deliver World-class Internet and make our customers’ lives a whole lot brighter,” added Fonternel.

Since MTN was launched in Uganda in 1998, it has made major investments in the country. In 2012 alone, its CAPEX investments exceeded USD 80 million. This investment was mainly in expanding the network infrastructure to support the mobile subscriber growth as well as the rollout of new innovative products and digital solutions. MTN Uganda plans to invest an additional USD 70 million in 2013 towards further infrastructure development.

“In terms of Network Infrastructure, MTN Uganda has deployed 2,800km of fibre backbones achieved with multiple layers and rings to protect customer experience across all national regions and provide dedicated business solutions to SMEs and Corporate Enterprises. Another 400km of Fibre is currently under deployment between Mutundwe in Kampala and Kyenjojo district in Western Uganda and should be completed within the coming months,” said Rami Farah, MTN Uganda Chief Technical Officer.

Furthermore, MTN Uganda extended the fibre network backbone and built five regional switching centres in the East, West, North and Central regions. MTN also built a fibre optic cable through Tanzania into Rwanda, providing an alternative data capacity route through Katuna into Uganda.

MTN Uganda has over the last 6 months rolled out approximately 100 new Base Transmission Sites to new coverage areas while commissioning another batch of capacity sites to enhance the quality of network services. MTN Uganda currently has more than 1,100 network sites across all regions in Uganda.

“The continuous CAPEX investment by MTN is aimed at providing our customers with the best possible user experience across the country. We would like to ensure consistent and reliable network quality for all existing customers and also to enable many more new customers to enjoy the best of what Mobile Technology has to offer,” concluded Farah.

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Statement by an IMF Mission to The Gambia for Concluding Discussions of the First Review of the ECF Arrangement

Posted on 15 April 2013 by Africa Business

BANJUL, Gambia, April 15, 2013/African Press Organization (APO)/ An IMF mission led by Mr. David Dunn visited The Gambia during April 4-10, 2013, to conclude discussions on the first review of the authorities’ macroeconomic and financial program that is supported by the IMF under its Extended Credit Facility (ECF). The mission met with His Excellency President Yahya AJJ Jammeh, Honorable Minister of Finance and Economic Affairs Abdou Kolley, Governor of the Central Bank of The Gambia (CBG) Amadou Colley, and other senior officials.

At the conclusion of the visit, Mr. Dunn made the following statement in Banjul:

“The Gambian economy is still recovering from the severe drought of 2011. Real gross domestic product (GDP) grew by an estimated 4 percent in 2012, led by a partial rebound in crop production and strength in the tourism sector. Inflation remained under control, ending the year at just under 5 percent, despite the depreciation of the Gambian dalasi during the second half of the year. A substantial overrun in government spending late in the year resulted in higher-than-budgeted domestic borrowing (3½ percent of GDP).

“The outlook for the economy is generally favorable for 2013, but there are risks. Real GDP growth is expected to accelerate, if the recovery in crop production is sustained. Also, by accessing new markets, the potential for growth in tourism looks good. Inflation, however, has picked up, partly due to side effects from the introduction of the value-added tax (VAT) at the beginning of the year. For example, although the VAT is applied to firms with a turnover of at least one million dalasis, we understand that many smaller businesses also raised their prices opportunistically. During the first quarter of 2013, government spending once again exceeded planned allocations, contributing to an uptick in Treasury-bill yields. Correspondingly high bank lending rates are discouraging private sector borrowing.

“The mission welcomes the Government’s decision to tighten fiscal policy by reducing its domestic borrowing needs to 1½ percent of GDP in 2013 and then to ½ percent of GDP a year or less, beginning in 2014, which will help lower the heavy domestic debt burden. The mission also welcomes the intention of the Government to submit a fully-funded supplementary budget to the National Assembly later this month.

“The mission also welcomes the CBG’s prudent monetary policy. Targets for reserve and broad money growth have been tightened to stem potential inflationary pressures and stabilize the dalasi, which has continued to weaken against most major currencies.

“The mission was encouraged by the authorities’ determination to strengthen the Government’s revenue collection. It supported the target of the Large Taxpayers Unit of the Gambia Revenue Authority (GRA) to achieve 100 percent compliance with taxpayers’ income tax filings in the current year, which will help broaden the tax base. This is necessary if business-friendly tax reforms—such as a reduction in tax rates—are to be considered in the future. The mission also welcomed efforts by the GRA to strengthen its audit functions.

“The mission reached agreement, ad referendum, on program targets for 2013. The IMF Executive Board could consider the completion of the review by end-May 2013.

“The mission thanks the authorities for candid and constructive policy discussions and expresses its appreciation for the excellent cooperation during its visit.”

 

SOURCE

International Monetary Fund (IMF)

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Sustainable Energy for All: Sector Results Profile

Posted on 11 April 2013 by Africa Business

World Bank Group financing for power generation, transmission and distribution, and energy policy and regulatory reform has helped expand access to millions of households in over 60 countries. Bank Group financing, combined with advisory and analytical services, knowledge products, as well as policy support, has also helped launch and scale up renewable energy generation and energy efficiency at national, sub-national and municipal levels. During 2002-11, the Bank supported projects for the construction and rehabilitation of about 115,000 kilometers of transmission and distribution lines and about 19,000 megawatts of generation capacity to improve access to reliable energy.

Off-grid solar power is lighting up gers and herders' lives across the vast steppes of Mongolia. Seventy percent of Mongolia’s herders now have access to electricity.

Challenge

More than 1.2 billion people—about 17 percent of the world’s population—are without access to electricity, most of them concentrated in about a dozen countries in Africa and Asia. Another 2.8 billion rely on wood, charcoal, dung and coal for cooking and heating, which results in over four million premature deaths a year due to indoor air pollution. Shortages in power supplies, and their unreliable and poor quality, due to underinvestment, are also major challenges facing developing countries.

Electricity access must be reliable as well as environmentally and socially sustainable. Ensuring these depends on business models robust enough to mobilize financing, as well as policy and institutional frameworks that ensure that electricity access projects are both economically viable and sustainable from a climate perspective.

Solution

The Bank Group supports development of energy systems based on least-cost options with an emphasis on renewable sources, such as hydropower, wind, solar and geothermal, while also promoting energy efficiency. Projects support achievement of universal access to electricity and modern household fuels, as well as improved utility performance and sector governance. The Bank Group also provides financing and advice to countries on oil and natural gas extraction, production, processing, transmission and distribution.

Representative projects include support for grid expansion in India, rural electrification in Ethiopia, hydropower projects in Senegal and Cameroon, increased geothermal capacity in Kenya and Indonesia, off-grid solar home systems in Bangladesh and Mongolia, and support for off-grid lighting solutions in Africa through the Bank-International Finance Corporation (IFC) partnership, Lighting Africa.

Results

During 2002-11, the Bank supported projects for the construction and rehabilitation of about 115,000 kilometers of transmission and distribution lines and about 19,000 megawatts of generation capacity to improve access to reliable energy.

Some examples of results achieved with IBRD-financed projects include:

India: To extend power to India’s nearly 400 million people currently without electricity requires a massive expansion of transmission capacity. World Bank financing has helped India expand transmission across the country’s regions by 52 billion kilowatt-hours. It has also supported a five-year program from 2008-12, led by India’s Power Grid Corporation to increase its circuit by 40,000 km to reach 100,000 km, raising inter-regional electric power transfer capacity from 21 to 37 gigawatts. A $1.0 billion IBRD-financed project has supported expansion of five regional transmission systems, to enable transfer of power from energy-surplus regions to towns and villages in under-served regions. This expansion has helped to integrate the national grid, resulting in a more reliable system and reduced transmission losses.

Mexico: Mexico has achieved an energy efficiency milestone by distributing almost 23 million energy-saving light bulbs for free. The national program, partially financed by $185 million from the Global Environment Fund, established over 1,100 exchange points in 2011-12 at which customers replaced their incandescent bulbs with compact fluorescent lamps (CFLs).  In total, more than 5.5 million Mexican families now use energy-saving lamps that consume only 20 percent of the energy and last 10 times longer than a traditional light bulb. The first stage of the program, partially financed by the World Bank, resulted in savings of 1,400 gigawatt hours (Gwh). The program also enables families to save up to 18 percent of their electric bill.  When the second stage ends in 2014, it is estimated that the saving will be of 2,800 Gwh per year, preventing about 1.4 million tons of CO2 emissions.

The government of Bangladesh envisions a country with electricity for all. The World Bank has supported this vision of Bangladesh for 40 years.

Some highlights of results achieved in IDA-supported projects include:

Bangladesh: In 2002, only 7,000 Bangladeshi households were using solar panels. Today, more than 1.4 million low-income rural households in Bangladesh have electricity—delivered by solar photovoltaic (PV) panels. Installations of the panels under the IDA-supported Rural Electrification and Renewable Energy Development Project have doubled since 2010 to 40,000 a month. A $130 million IDA credit in 2009 and another for $172 million in 2011 followed earlier IDA financing that launched the project in 2002.

Competitively priced solar PV panels and a well-designed financing scheme have combined to deliver life-changing—and zero-carbon—electricity to bottom-of-the-pyramid families on a scale that was inconceivable only a few years ago. Under the program, non-governmental (NGO) partner organizations install the systems in households following standards, with the households paying 10-15 percent down with the rest financed by a microcredit loan. Funds from IDA, among others, re-finance part of the microcredit extended to the households. In addition to IDA support, the solar home systems program in Bangladesh has received financing from the World Bank-managed Carbon Finance Unit, the Global Partnership on Output-Based Aid, and several other donors including the Asian Development Bank, and the German agencies KfW and GIZ.

The program aims to deliver off-grid solar power to 2.5 million households by 2014, while also promoting mini-grids for rural consumers. In addition to delivering power to un-served communities, it is helping to reduce carbon emissions from avoided use of kerosene and diesel for lighting. The solar electrification industry and its supply chain in Bangladesh has also helped create, directly and indirectly, about 50,000 jobs.

Ethiopia: In Ethiopia three IDA credits totaling $440 million helped expand electricity to community services in about 4,300 towns and villages, benefiting over 30 million people by powering streetlights, local flour mills, water pumping and irrigation installations, telecommunications, businesses, schools and clinics in five years.  The Electricity Network Reinforcement and Expansion Project, approved by the World Bank in May 2012, extends this work by upgrading and extending the grid in order to improve the overall service delivery of the Ethiopian electricity network. The last project is expected to benefit 385,000 people.

Mongolia: About 500,000 people in Mongolia have gained access to solar power through a program launched in 2006 by the Mongolian government with support from the World Bank and the Government of the Netherlands. Thanks to the National 100,000 Solar Ger (Yurt) Electrification Program, 70 percent of Mongolia’s herders now have access to modern electricity.

In most of the vast landscape of Mongolia, nomadic herders used to have no access to electricity. Take a look at how a project helped bring changes.

Bank Group Contribution

Since 2008, the Bank Group has provided $45.3 billion for energy projects, with $21.9 billion from IBRD, and $8.5 billion from IDA. Of the total Bank Group financing, $11.6 billion—25.7 percent—was for renewable energy projects and programs, reflecting the determination of many countries to seek lower-carbon energy solutions. Energy efficiency, and transmission and distribution accounted for nearly one-third of energy financing. About 25 percent of the portfolio since 2008 is devoted to fossil fuel projects.

Partners

The Energy Sector Management Assistance Program (ESMAP) is a global knowledge and technical assistance program administered by the World Bank. ESMAP provides analytical and advisory services to low- and middle-income countries to increase their know-how and institutional capacity to achieve environmentally sustainable energy solutions for poverty reduction and economic growth. ESMAP is funded by Australia, Austria, Denmark, Finland, France, Germany, Iceland, Lithuania, the Netherlands, Norway, Sweden, and the United Kingdom, as well as the World Bank.

The World Bank-led Global Gas Flaring Reduction (GGFR) initiative is a public-private partnership that brings together representatives from major oil-producing countries and companies. The GGFR aims to minimize the flaring of natural gas associated with oil production by fostering critical collaboration between governments and industry so together they can address policy challenges and specific project implementation.  These efforts are starting to pay off. Since 2005, flaring of gas has dropped worldwide by almost 20 percent, preventing over 270 million tons of CO2 emissions, equivalent roughly to taking some 52 million cars off the road.

Lighting Africa is a joint IFC and World Bank program that works towards improving access to better lighting in areas not yet connected to the electricity grid. Lighting Africa catalyzes and accelerates the development of sustainable markets for affordable, modern off-grid lighting solutions for low-income households and micro-enterprises across the continent.

Moving Forward

The Bank Group’s strategic priorities in the energy sector are anchored around the goal of improving electricity access in an environmentally and socially sustainable manner. As energy security is essential for sustainable growth, the Bank will continue to work with other development partners to assist countries in achieving it, including through regional energy integration.

The Bank pursues a portfolio approach, including support for investments in power generation that are least cost and sustainable; strengthening and expanding transmission and distribution power networks; improving efficiency through technical assistance, and advisory services. The latter helps countries improve the performance of their electricity utilities, brings greater rigor to their governance, and offers guidance on policy and regulatory frameworks to attract and increase the impact of public and private sector investments. Some developing countries, especially those emerging from conflict, have weaknesses in capacity to implement projects. The Bank provides support to strengthen their capacity.

The World Bank is also sharing leadership with the UN of the Sustainable Energy for All initiative, which has three global energy objectives to be achieved by 2030: universal access to electricity and clean cooking fuels doubling the share of the world’s energy supplied by renewable sources from 18 to 36 percent; and doubling the rate of improvement in energy efficiency from 1.2 to 2.4 percent annually.

To date, about 70 countries have opted in to Sustainable Energy for All, while many public, private and nongovernmental actors have made commitments to support its implementation. The Bank committed to doubling the leverage of its energy financing, providing technical assistance to several opt-in countries and supporting initiatives in partnership with the Energy Sector Management Assistance Program (ESMAP). These initiatives include the Global Geothermal Development Plan, Lighting Africa and Lighting Asia, the Global Alliance for Clean Cook Stoves, the Global Gas Flaring Reduction Partnership (Phase Four) and mapping of renewable energy resources.

Beneficiaries

One beneficiary of the Bangladesh rural electrification project is Mussarat Begum, who runs a small teahouse in Garjon Bunia Bazaar, a rural community. She bought a solar home system for $457, initially paying $57, and borrowing the rest. She repays the loan in weekly installments with money she earns by keeping her now-lighted chai-shop open after dark.  At the same time, her children are able to study at night.

“My business is booming and my family lives much more comfortably with our increased income,” she said. “But most importantly, I now have electricity at home and my children can study at night. They are doing much better at school.”

Source: World Bank

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IMF Executive Board Completes Second Review Under the Extended Credit Facility Arrangement for Malawi and Approves US$19.6 Million Disbursement

Posted on 08 April 2013 by Africa Business

 

The Executive Board of the International Monetary Fund (IMF) today completed the second review of Malawi’s economic performance under a program supported by the Extended Credit Facility (ECF) arrangement. The Board’s decision enables the immediate disbursement of an amount equivalent to SDR 13.02 million (about US$19.6 million), bringing total disbursements under the arrangement to an amount equivalent to SDR39.06 million (about US$58.7 million).

The three-year ECF arrangement for Malawi in the total amount of SDR 104.1 million (about US$156.2 million) was approved on July 23, 2012.

Following the Board’s discussion, Mr. David Lipton, First Deputy Managing Director and Acting Chair, issued the following statement:

“Malawi’s performance under the Fund-supported program has been commendable despite a difficult environment. The policy reforms have begun to yield positive results, including increased availability of foreign exchange. The government also successfully rolled out its social protection programs.

“Continued tight monetary policy and fiscal restraint are needed to contain aggregate demand, stabilize the exchange rate and prices, and boost international reserves. The Reserve Bank of Malawi (RBM) is committed to maintaining a tight monetary stance until inflation pressures recede. The fiscal authorities are also committed to implementing prudent policies in the run up to the 2014 general elections. In particular, the FY2013/14 budget will include measures to offset the impact of recent wage increases on the budget. The authorities are also pursuing reforms to broaden the tax base, improve revenue administration, and exercise greater control over expenditures.

“It will be important to safeguard the stability of the financial system. The RBM is strengthening its oversight of banks and is assessing the true financial condition of all banks with a view to enforcing prudential regulations. It has also enhanced its monitoring of banks that have continued to have difficulty meeting liquidity requirements.

“The authorities are making progress in implementing structural reforms to enhance the country’s competitiveness and exports. They are committed to removing regulatory hurdles to doing business in Malawi.”

Source: IMF

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IMF Executive Board Completes First Review Under ECF Arrangement for Niger and Approves US$16.9 Million Disbursement

Posted on 29 March 2013 by Africa Business

NIAMEY, Niger, March 29, 2013/African Press Organization (APO)/ The Executive Board of the International Monetary Fund (IMF) today completed the first

review of Niger’s economic performance under the program supported by a three-year, SDR 78.96 million (about US$118.3 million) Extended Credit Facility (ECF) arrangement approved by the IMF’s Executive Board on March 16, 2012 (see Press Release No. 12/90). The decision enables an immediate disbursement of an amount equivalent to SDR 11.28 million (about US$16.9 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 22.56 million (US$33.8 million).

In completing the review, the Executive Board approved the request for a waiver for nonobservance of the performance criterion on new non-concessional external debt with maturities of one year or more. The Executive Board’s decision on the first review was taken on a lapse of time basis.1

Economic activity was buoyant in 2012, with economic growth estimated at over 11 percent, thanks to the coming onstream of a new oil project and a rebound in agricultural production. Average inflation is estimated to have remained slightly below 1 percent, as upward pressures on food prices caused by food shortages in the first part of the year were largely offset by lower energy prices. Credit to the private sector expanded significantly, driven by high credit demand from public enterprises and trading firms. The current account deficit is projected to decline, reflecting the coming onstream of petroleum production resulting in net exports of petroleum products.

Fiscal revenues in 2012 increased relative to 2011, but are likely to fall short of program targets for 2012 due to weaknesses in customs and oil revenue. All end-June quantitative performance criteria were met, but at the expense of expenditure constraint. Several end-September fiscal targets were missed as spending increased in order to bring poverty-reducing spending back in line with program targets and due to an increase in military spending following the deterioration in the regional security situation. Additional measures were taken to limit spending during the remaining months of 2012. The continuous performance criterion on non-concessional borrowing was breached because of the contracting of a non-concessional loan with the Republic of Congo, but a waiver was granted by the Executive Board, as the loan was cancelled before disbursing. The majority of the structural reforms under the program were implemented, albeit with delays, and a plan to stem the losses at the oil refinery has been developed for implementation in 2013.

Medium-term prospects remain positive, thanks to ongoing investment in the natural resource sector, with growth projected at 6¼ percent in 2013 and inflation projected to remain moderate. However, risks remain tilted to the downside given the fragile security situation in the region; the frequent climatic shocks, as evidenced by the August 2012 floods; the uncertainty regarding commodity prices; and potential delays in the implementation of natural resource sector projects.

The ECF-supported program for 2013 builds on the government’s medium-term strategy set out in the Memorandum of Economic and Financial Policies of March 2, 2012. It also takes into account the authorities’ newly adopted ambitious poverty reducing strategy paper, the Plan for Economic and Social Development. A key goal of the 2013 program is to tackle the revenue weaknesses by advancing the plan to strengthen the financial position of the oil refinery and the implementation of measures already taken to strengthen customs. Other elements of the program include (i) creating fiscal space for development spending while maintaining debt sustainability; (ii) rebuilding the government deposits at the central bank; (iii) implementing structural reforms to strengthen budget execution, treasury management, and domestic revenue collection; (iv) enhancing the oversight of the natural resource sector; and (v) continuing ongoing reforms aimed at financial development and improving the business environment.

1 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.

 

SOURCE

International Monetary Fund (IMF)

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IMF Concludes Third ECF Review Mission to Côte d’Ivoire

Posted on 28 March 2013 by Africa Business

ABIDJAN, Côte d’Ivoire, March 28, 2013/African Press Organization (APO)/ An International Monetary Fund (IMF) mission visited Abidjan during March 13-27, 2013, to conduct discussions on the third review of a program supported by the Extended Credit Facility (ECF), which was approved by the IMF Executive Board on November 4, 2011 (see Press Release No. 11/399) in the amount of SDR 390.24 million (about US$616 million). The mission met with H.E. Dr. Alassane Dramane Ouattara, President of the Republic of Côte d’Ivoire; H.E. Mr. Daniel Kablan Duncan, Prime Minister and Minister of Economy and Finance; H.E. Dr. Albert Toikeusse Mabri, State Minister for Planning and Development; H.E. Ms. Niale Kaba, Minister at the Prime Minister’s Office in charge of Economy and Finance; H.E.Mr. Adama Toungara, Minister of Petroleum, Mines, and Energy; H.E.Mr. Konan Gnamien, Minister of Civil Service and Administrative Reform; H.E.Mr. Mamadou Sangafowa Coulibaly, Minister of Agriculture; H.E.Mr. Jean-Claude Brou, Minister of Industry; Mr. Jean-Baptiste Aman Ayayé, National Director of the Central Bank of West African States; and other senior government officials. The mission also met with members of the business and donor communities. Discussions focused on recent economic developments, growth prospects and policy implementation under the ECF.

At the conclusion of the mission, Mr. Michel Lazare, Assistant Director in the IMF’s African Department, issued the following statement:

“The Côte d’Ivoire authorities and the IMF team made excellent progress in discussions for the third review of the ECF-supported program and have reached agreement, subject to approval by IMF management and the Executive Board, that the government’s policies could be supported with a disbursement of SDR 48.8 million (about US$74 million) under the IMF’s Extended Credit Facility (ECF) arrangement. Executive Board consideration is expected at the end of May 2013.

“Macroeconomic performance in 2012 was better than expected, with real gross domestic product (GDP) growth of 9.8 percent. Average annual inflation in 2012 was limited to 1.3 percent. Budget execution was also better than expected. Cote d’Ivoire achieved the full regularization of its external debt for the first time in around 30 years, following the attainment of the Heavily Indebted Poor Countries (HIPC) Initiative Completion Point and agreements with its commercial creditors. All of the performance criteria, and four out of five indicative targets, for end-December 2012 under the ECF arrangement were observed.

“The macroeconomic prospects for 2013 are positive, with a vigorous growth rate and low inflation expected. With the support of substantial external financing, public investment would rise to over 7 percent of GDP, in line with the National Development Plan 2012-2015.

“Clear progress has been made recently in the implementation of structural reforms, especially to improve the business climate and strengthen the energy sector, though delays have been encountered in some areas. In addition, the cocoa sector reform is contributing to the reduction of rural poverty. There have been delays in preparing a medium-term wage bill strategy, in restructuring the public sector, in regularizing domestic debt, and in adopting a new electricity code.

“The government’s reform program is set to continue. Key priorities in this regard are value-added tax reform; further improvement in business climate; the adoption of a new Electricity Code; preparation of a medium-term strategy to manage the wage bill; and the preparation of a Competition Law.

“Against this background of rising investment, continued implementation of the Fund-supported economic and financial program should result in substantial job creation, increased funding possibilities for pro-poor expenditures, and higher living standards more generally for the people of Cote d’Ivoire.

“The IMF team thanks the authorities for their hospitality and for the constructive discussions.”

 

SOURCE

International Monetary Fund (IMF)

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IMF Concludes First ECF Review Mission to Liberia

Posted on 23 March 2013 by Africa Business

MONROVIA, Liberia /African Press Organization (APO)/ An International Monetary Fund (IMF) mission led by Ms. Catherine McAuliffe visited Monrovia March 4–20, 2013, to conduct discussions for the first review under the Extended Credit Facility (ECF). 1 The mission met with President Ellen Johnson Sirleaf and held discussions with Acting Minister of Finance Sebastian Muah, Central Bank of Liberia (CBL) Executive Governor Joseph Mills Jones, other senior officials, legislators, representatives of the private sector, civil society organizations, and development partners. The mission also conducted a one-day high level seminar on natural resource revenue management and an outreach event for University of Liberia students.

At the end of the mission, Ms. McAuliffe issued the following statement in Monrovia:

“Liberia’s economic growth is on an upward trajectory and economic prospects over the medium term remain favorable. Real gross domestic product growth is estimated at about 8.3 percent in 2012 and 7.5 percent in 2013, driven by continued strong growth in the mining sector, with some slowing in non-mining activity. Risks to growth remain on the downside from potentially sluggish global demand for commodities, but also from delays in implementing public sector capital investment projects. Inflation is in single digits and the external payments position remains stable. All but one of the end-December performance criteria were met (the ceiling on the CBL’s gross direct credit to central government was breached by a small margin). Most of the end-December structural benchmarks have now been completed.

“The mission reached agreement ad referendum on the first review under the three-year ECF arrangement. Policy discussions focused on: measures to address the projected budgetary resource shortfall this fiscal year due to lower than budgeted revenue and foreign borrowing which will require containing current expenditures during the remainder of the fiscal year; and on the need for realistic budget next fiscal year, including realistic revenue projection, aligning capital spending with core revenue and secured borrowing only, and holding current spending constant in nominal terms. The mission also stressed the critical importance of timely submission, approval and execution of the July 2013-June 2014 fiscal year budget. The mission welcomed the CBL’s commitment to maintain reserves at about 3 months of imports and to maintain the ongoing efforts to improve risk management at the CBL and commercial banks.

“The authorities’ structural reform agenda going forward focuses on strengthening financial oversight and reporting of state owned enterprises; enhancing budget programming, control and monitoring; improving capital spending execution and containing non-priority current expenditures; developing the financial sector and supporting the stability of the banking system; and improving national accounts statistics.

“The mission wishes to thank the Liberian authorities and its other counterparts for the constructive and cooperative discussions that took place in Monrovia.”

1 The ECF has replaced the Poverty Reduction and Growth Facility as the Fund’s main tool for medium-term financial support to low-income countries. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.

 

SOURCE

International Monetary Fund (IMF)

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Concluding Statement of the IMF Mission to Comoros

Posted on 23 March 2013 by The African Press Organization

MORONI, Comoros /African Press Organization (APO)/ A team from the International Monetary Fund (IMF), visited Moroni from March 13 to 22, 2013 for discussions on the fifth review of the Union of Comoros’ Extended Credit Facility (ECF)1 arrangement. The mission met with His Excellency Dr. Ikililou Dhoinine, President of the Union, and held discussions with Vice-President and Finance Minister Soilihi, Governor of the Central Bank of the Comoros Chanfiou, Permanent Secretary of the Committee to Monitor Reforms Oubeidi, and other government and central bank officials, as well as representatives of the private sector and the donor community.

The current arrangement under the ECF was approved in September 2009 (see Press Release No. 09/315). At the conclusion of the fourth review in December 2012 the Executive Board of the IMF also agreed that Comoros had reached the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative (see Press Release No. 12/492).

At the conclusion of the mission, Mr. Harry Trines, the IMF mission chief for the Union of the Comoros, issued the following statement today in Moroni:

“The mission has reached staff-level understandings with the authorities on policies for completing the fifth ECF review. Consideration by the IMF’s Executive Board of the review is tentatively scheduled for May, following approval by Management of the IMF. Completion of this review will enable Comoros to receive a disbursement of SDR 2.3 million (about US$3.45 million) from the IMF.

“Performance under the program has been satisfactory. All the quantitative targets for end-December 2012 were met, as were four of the five structural benchmarks under the program.

The Government has continued to make determined efforts to implement the economic and structural reforms outlined in the program with the IMF and supported by Comoros’ partners.

“Economic indicators improved in 2012. Gross domestic product growth strengthened to around 3 percent, including as a result of a pick up in investments and a normalization of wage payments in the public sector. Reserves reached the equivalent of 7 months of imports and the domestic primary budget surplus more than doubled, mainly owing to a large increase in receipts under the Economic Citizenship Program.

“Broad debt relief received under the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative has lowered the country’s future debt service obligations, allowing a reorientation of expenses toward social priority areas such a health, education, energy, and infrastructure. However, important challenges remain going forward to establish a basis for rapid sustainable growth and poverty reduction in the country.

“The mission discussed with the Government the economic prospects for the coming year, revisions to the 2013 budget to reorient spending toward priority areas, and structural reform measures needed to achieve the Government’s medium-term objectives. Areas of focus included the implementation of the organizational frameworks for the public administration, continued improvement in banking supervision, privatization of Comores Telecom, and reforms of the public utility (MAMWE) and “Société Comorienne des Hydrocarbures,” with the help of the African Development Bank, the European Union, and the World Bank. Establishing reliable electricity and energy supplies is crucial to sustaining economic growth and improving the business environment. A continued prudent borrowing policy will also be important.

“The mission welcomes the authorities continued commitment to the implementation of the reform program. It would also like to thank the authorities for the excellent cooperation and warm hospitality during the mission’s visit.”

1 The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the newly established Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of Low Income Countries (LICs), including in times of crisis. The ECF succeeds the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for providing medium-term support to LICs, with higher levels of access to financial resources, more concessional financing terms, more flexible program design features, as well as streamlined and more focused conditionality.

 

SOURCE

International Monetary Fund (IMF)

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