Countries will start a new chapter in their development this year with the United Nation’s Sustainable Development Goals. Designed to replace the Millennium Development Goals, these new goals will broaden the vision of development to embrace economic, social, and environmental issues. To achieve these goals, two elements are critical: money and the right policies to use the money. The IMF, along with many others in the global community, will partner with countries to bring these two elements together.
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Economists are paying increasing attention to the link between financial inclusion—greater availability of and access to financial services—and economic development. In a new paper, we take a closer look at exactly how financial inclusion impacts a country’s economy and what policies are most effective in promoting it.
The new framework developed in this paper allows us to identify barriers to financial inclusion and see how lifting these barriers might affect a country’s output and level of inequality. Because the more you know about what stands in the way of financial inclusion, the better you can be at designing policies that help foster it.
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Once again, the latest review of growth prospects for sub-Saharan Africa shows that the region’s economy is in strong health. Growth in the region is set to pick up to 5½ percent in 2014 compared to 4.9 percent last year (see Chart 1). My view is that this growth momentum will continue over the medium term if countries rise to new challenges and manage their economies as dexterously as they have over the past decade or so.
So what explains this continued strong growth performance? Apart from good macroeconomic policies in the region, the growth has been underpinned by investment in infrastructure, mining, and strong agricultural output. And favorable global tailwinds—high demand for commodities and low interest rates—have played a major supporting role.
We’ve had a spate of good news on the economic front recently. Does this mean that we are finally out of the fiscal woods? According to our most recent Fiscal Monitor report, not yet, as public debt remains high and the recovery uneven.
First, the good news. The average deficit in advanced economies has halved since the 2009 peak. The average debt ratio is stabilizing. Growth is strengthening in the United States and making a comeback in the euro area, and should benefit from the slower pace of consolidation this year. Emerging markets and developing countries have maintained their resilience, in part thanks to the policy buffers accumulated in the pre-crisis period. Talks of tapering in the United States have left a few of them shaken, but not (quite) stirred.
But there is still some way to go. The average debt ratio in advanced economies, although edging down, sits at historic peaks, and we project it will still remain above 100 percent of GDP by 2019 (Chart 1). The recovery is still vulnerable to several downside risks, including those stemming from the lack of clear policy plans in some major economies. The recent bouts of financial turmoil have raised concerns that the anticipated tightening of global liquidity could expose emerging markets and low-income countries to shifts in investor sentiment and more demanding debt dynamics.
Sub-Saharan Africa's solid growth record has been supported by several factors, including significantly less civil conflict, the generally favorable commodity price developments benefiting Africa’s natural resource exporters; and the extensive debt relief provided to most highly-indebted poor countries. But I would ascribe key importance to sound policy choices by African governments – both in terms of pursuing appropriate macroeconomic policies and pressing ahead with important reform measures.
Suddenly it's the thing everyone is talking about. Income inequality. In North Africa and the Middle East, jobless youth sparked the Arab Spring. In the United States, the growing gap between rich and poor is the “meta concern” of the Occupy Wall Street movement. Worldwide, frustrations appear to be on the rise. And, in sub-Saharan Africa, sustained economic growth may have produced tremendous advances, but a large proportion of the population is still living in poverty. Here, the underlying situation is a little more complex. In July, I wrote about the importance of inclusive growth and whether economic growth was a necessary or a sufficient condition for poverty reduction. Our latest Regional Economic Outlook for Sub-Saharan Africa takes that thinking a step further, with new analysis that looks at how living standards for the poorest households have actually been changing in some countries in the region.
At a conference in Tanzania a year ago, the IMF committed to improving its policies and operational approaches in Africa and pledged to ensure Africa’s concerns would be taken into account during the meetings of the Group of Twenty (G-20) industrialized and emerging market countries and be an advocate for Africa. Now, IMF Managing Director Dominique Strauss-Kahn, on a visit Kenya, South Africa, and Zambia--his third trip to the region in the past 12 months--presents the scorecard of how the IMF has delivered on its promises to the continent.