IMF Managing Director highlights the importance of foreign investment during African tour, by José Ángel Rueda

IMF Managing Director Christine Lagarde has wrapped up an official tour to Africa. To date two speeches delivered by Mrs. Lagarde during her tour have been published at IMF’s website: the first one before the Malawian Confederation of Chambers of Commerce and Industry in Lilongwe on 5 January 2013[1] and the second one before the National Assembly of Ivory Coast in Abidjan on 7 January 2013.[2]

In both speeches Mrs. Lagarde underlined Africa’s growth in the last decade that led her to speak about the African lions even outpacing the Asian tigers. These speeches also contain IMF’s good expectations regarding economic growth in each country. For example, in Lilongwe Mrs. Lagarde spoke about “the economic rebirth of Malawi and in Abidjan she assured that “[t]he time has come for a second Ivoirien miracle.”

The idea of foreign investment is present in both speeches, particularly in the one delivered in Abidjan. Mrs. Lagarde defined that the priority for Africa today is, by reference to the words expressed by current Ivorian President Alassane Ouattara in 1999, to keep the light of courage to take the tough decisions burning brightly by  having, for example, “stronger institutions, better governance, better transparency, and a better environment for business—to entice foreign investment and reduce dependency on aid.” In particular, Mrs. Lagarde praised the Government of Ivory Coast for “[b]oosting public investment from 3 percent of GDP during the long political crisis to more than 7 percent of GDP in the 2013 budget, and actively enticing foreign investment.”

In Lilongwe Mrs. Lagarde also highlighted that “[t]he strength and resilience of Africa also comes from a reorientation of trade and investment toward a more diverse set of partners. Today, nontraditional partners account for 50 percent of African imports and 60 percent of exports. China is now the region’s largest single trading partner. So Africa is becoming more open to the wider world—and more open to itself, as intra-regional trade has also doubled since 1990.” 

Nonetheless, she also recalled the consequences of worldwide economic interdependence and the continued uncertainty about prospects in Europe, the United States, and China: “as long as the global turmoil persists, people on this continent remain at risk. The links are simply too strong— from trade, foreign investment, remittances, and aid. IMF research shows that a sustained global slowdown of 2 percentage points of GDP would reduce growth in sub-Saharan Africa by about 1¼ percentage points a year.” 

Two interesting reading materials for assessing Africa’s economic future.