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Africa: Growth Slowing Date distributed (ymd): 010219 Document reposted by APIC
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Region: Continent-Wide Issue Areas: +economy/development+ Summary Contents: Just before a week-long joint trip by World Bank and IMF leaders to Africa, the World Bank released its new African Development Indicators 2001, showing overall declines in foreign aid as well as direct investment. The full report, with updated statistics on a wide variety of indicators through 1999, is available on a section of the World Bank site available to journalists who register with the site (http://media.worldbank.org).
The two institution heads are meeting with African leaders at mini- summits in Mali and in Tanzania, with additional stops in Nigeria and Kenya. Initial press reports from the BBC (http://news.bbc.co.uk/hi/english/world/africa) indicate they face considerable skepticism on their trip, and were met in Bamako by demonstrators calling for debt cancellation.
On debt, a table in African Development Indicators 2001 records a slight decrease in the continent's total external debt from $324 billion in 1998 to $319 billion in 1999 (with sub-Saharan Africa's debt declining from $230 billion in 1998 to $228 billion in 1999).
Also below, an article from Jubilee Plus documenting the limitations of the creditors' latest debt relief measures for Cameroon. The article concludes that 'the country will still pay more this year in debt service than for health and education combined, and will need to borrow money even to deal with its AIDS epidemic.'
In a related posting also sent out today, Joseph Hanlon reports on IMF/World Bank concessions on export policy for Mozambique's cashews and sugar.
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THE WORLD BANK GROUP
News Release No. 2001/23/S
Less Foreign Aid And Poor Trade Terms Hurt Africa's Economies - But Some Countries Register Solid Growth
New report shows foreign aid continues to fall as well as foreign direct investment
WASHINGTON, February 15, 2001 - On the eve of a joint trip to Africa by World Bank President James Wolfensohn and IMF Managing Director Horst Koehler to meet many of the continent's heads-of-state, a new World Bank statistical report on Africa shows that growth in the region slowed significantly after 1998, with average per capita GDP falling by almost 1 percent in 1998-99. The report also shows how official aid to Sub-Saharan Africa has been falling from US$32 per head in 1990 to US$19 by 1998 despite evidence of its effective development results in those countries with sound social and economic policies.
Social indicators show mixed progress with a welcome rise in literacy and school enrollments for girls on one hand, but declining immunizations for children, and a widening HIV/AIDS epidemic across the region, on the other.
According to the latest edition of African Development Indicators 2001 - an annual World Bank compilation of key African social and economic data for the period 1970-99, covering indicators such as trade and external debt, communications, and aid flows - the slowdown in growth was the result of regional and civil wars, poor governance in some countries, and serious external shocks such as the rapid hike in oil prices at the same time that export earnings from primary commodities collapsed. Moreover, the report warns that growth is below the 5 percent annual level needed to prevent a rise in the numbers of poor people on the continent.
While growth trends for the region as a whole remain depressed, some African countries are doing well. Fourteen countries have grown on average by 4 percent a year during the 1990s, with rising annual incomes of 2-3 percent and even higher, with another 10 countries following close behind with growth rates above 3 percent a year. Some countries have grown at 7 percent a year or higher (Mozambique, 7 percent, and Uganda, 7.1 percent).
"These figures show us that economic reforms over recent years have slowly but surely improved growth in many African countries and allowed the private sector to take root," says Alan Gelb, Chief Economist of the World Bank's Africa region. "However, despite this rising trend, countries are still vulnerable to conflict and external shocks in world markets, such as the recent rapid increase in oil prices and fallout from the East Asia crisis. These two forces have together produced highly unfavorable terms of trade for oil importers."
In late December, the World Bank gave US$155 million in credits to help seven African countries - Madagascar, Mali, Mauritania, Niger, Rwanda, Zambia, and Uganda - cope with an unexpected surge in oil prices and other losses in their terms of trade. These factors were causing serious hardship for the poor in terms of rising energy and transportation costs, which in turn were jeopardizing the success of the countries' reform programs.
Civil war hurts growth and social progress
The new report also shows how civil conflict in the region has blunted and reversed growth prospects for war-torn countries. While the trend for many African countries during the 1990s was one of slow but steady economic improvement, those in conflict suffered negative growth and an alarming deterioration in basic conditions (Angola -0.2 percent, Burundi -2.4 percent, Democratic Republic of Congo, -4.6 percent, Rwanda, -2.1 percent, Sierra Leone, -4.6 percent).
Africans living in countries beset by conflict were also more likely to have shorter life expectancy at birth and have higher infant mortality rates than other more stable countries. Sierra Leone is a striking illustration of this trend with the region's lowest life expectancy rate at just 37 years, and its highest infant mortality rate at 169 deaths per one thousand.
Foreign direct investment and official aid levels fall
According to African Development Indicators 2001, two important sources of finance, foreign direct investment (FDI) and official aid, are also declining in size, and tend to favor those countries with lucrative mining and oil industries in the case of FDI, or countries with sound social and economic policies in the case of aid.
Of the US$2.52 billion in FDI that flowed into Sub-Saharan Africa during the last decade, just three countries accounted for much of that total - Angola, US$626 million, Lesotho, US$170 million, and Nigeria, US$876 million. If South Africa is excluded (as both a recipient and source of FDI), five other countries accounted for another US$576 million - Republic of Congo, Cote D'Ivoire, Equatorial Guinea, Namibia, and Sudan - leaving the remaining 40 countries of Sub-Saharan Africa to compete for just $US275 million in annual FDI flows.
Official aid has followed a similarly selective trend over the same period, and falling in terms of total volumes. Aid levels in 1999, for example, were US$10.8 billion compared to US$ 17.9 billion in 1992 when development assistance to Sub-Saharan Africa reached its highest-ever levels.
The new report shows that during the 1990s the region attracted an annual average of US$15.8 billion dollars in aid (nominal). As in keeping with FDI flows, most of this development assistance went to a small number of countries which bilateral and multilateral donors considered to have adopted modern economic and social policies and were performing well. These included Cameroon, Cote D'Ivoire, Ethiopia, Ghana, Kenya, Mozambique, Senegal, Tanzania, Uganda, and Zambia, all of which received well over US$500 million a year. Tanzania was the leading recipient of official assistance during the period with more than US$1 billion a year.
"During the 1990s, aid to Africa became more focused on poor countries with reasonable policies, and as a result it became more effective in reducing poverty, but this message did not get through to OECD electorates," says Paul Collier, Research Director for the World Bank's Development Economics department, and co-author of the upcoming book 'Aid and Reform in Africa: A Report from Ten Countries.' "OECD governments were cutting aid budgets to Africa during precisely the period when it started to work really well. Millions of Africans are in poverty today partly because of these cuts, which occurred at a time of unprecedented OECD prosperity."
Social indicators - poverty and ill-health persist but girls' education and literacy improve
African Development Indicators show clearly where the region's greatest social challenges and opportunities lie. Indeed, Africa's future economic growth will depend less on exploiting its natural resources, which are being depleted and are subject to long-run price declines, and more on its labor skills and its ability to accelerate a demographic transition.
Poverty
According to the latest data, some 300 million Africans live on barely 65 cents a day. The average GNP per capita for the region is US$492, but in 24 countries GNP per capita is under US$350, with the lowest incomes found in Ethiopia (US$100), the Democratic Republic of Congo (US$110), Burundi (US$120), and Sierra Leone (US$130).
The new report shows that overall Africa's demographic transition remains slow. Fertility has started to decline, particularly in countries with higher incomes and better access to contraception. Still, some countries in the region have the highest fertility rates in the world (Niger, 7.3; Somalia, 7.2; Angola and Burkina Faso 6.7). Even though the age dependency ratio has changed little, the percentage of the population aged 0-14 has fallen slowly during the past two decades.
Growing urbanization, and the rapid exodus of rural Africans to the continent's cities, has given Africa the largest rate of urban population growth in the developing world. Moreover, on current trends, the continent's urban population is expected to outnumber the number of people living in rural areas by 2025. In countries like Nigeria, Kenya and Tanzania, there are now twice as many people living in urban centers today than 20 years ago; in Mozambique, the percentage has almost tripled during the same period.
Health
Child mortality is a particularly acute problem for many countries in Africa. Infant mortality is close to 10 percent, and on average 151 of every 1,000 children die before the age of 5, although in many countries the mortality rate exceeds 200 per 1,000. The region has had the smallest improvement in under-5 mortality since 1970, and some countries - including Kenya, Zambia, Mozambique and Cote d'Ivoire - saw infant mortality increase in the 1990s. This compares with 53 in East Asia and 9 in high-income countries. Even allowing for Africa's low incomes, its under-5 mortality rates are exceptionally high.
Although life expectancy has risen slightly in Africa, this is happening at a slower rate than elsewhere and, since 1990 the HIV/AIDS epidemic has caused it to decline, especially in countries with high adult infection rates. In Zimbabwe, for example, life expectancy has fallen by five years, while in Botswana, it has fallen by over ten. Today in 21 African countries more than 7 percent of adults live with HIV/AIDS, with the highest absolute number of cases found in South Africa, where one in every five adults has contracted the virus. Countries like Niger, Sudan, and Mauritania, which have some of the lowest incidence of AIDS in the region, offer great potential for control.
Education
The new report shows that Africa has made more progress in education than in health with literacy rates improving for both men and women. At 41 percent, the illiteracy rate in the region is still high compared to rest of the world, but it is at its lowest point ever. Of particular significance is the advance being made in girls' education, with the percentage of illiterate women slowly declining from 66 percent in 1985 to 49 percent in 1998. While this represents welcome progress, far more needs to be done.
Although girls' enrollments continue to lag behind boys, primary school enrollment has increased slightly for women and the enrollment ratio of females in secondary school has more than doubled in the last two decades. This means that a greater number of African girls than ever before are attending primary and secondary schools.
Report offers new database system for African states
In a development that its authors hope will greatly help African countries improve the quality of their own statistical reporting, the data tables in the African Development Indicators were produced by an advanced World Bank information system called 'the 2nd generation Live Data Base' or 2gLDB, which the Bank offers ministries of finance, central banks, national statistical offices and other institutions in developing countries to help produce accurate and timely reports and publications.
The World Bank recently approved a grant to transfer the system to six Southern African countries (Mozambique, Botswana, South Africa, Lesotho, Tanzania, and Zambia) to strengthen their statistical reporting capabilities. The 2gLDB system will provide economists, decision-makers, and general business users in these developing countries with access to the latest information. Using technology in this way can help reduce poverty.
"The quality of development data depends on the source. Our goal is to empower statistical offices in Africa, and help them to move from hand-written National Account tables to a modern system that is easy to adopt, maintain, and capable of delivering quality data," says Ziad Badr, the team leader of African Development Indicators 2001, and a senior World Bank economist in its Africa region. "This will bring statistical institutions in Africa into the new millennium, and provide a reliable system to measure development progress and identify remaining challenges."
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Despite debt relief, Cameroon faces a new trap
Jubilee Plus, 2 February 2001 http://www.jubilee200uk.org/news/cameroon050201.html
(includes statistical tables not available in this
posting)
The Paris Club of bilateral debtors cancelled $874 million
of Cameroon's debts at a meeting on 24 January. This
is only 16 per cent of Cameroon's bilateral debt and
it does not end Cameroon's debt crisis. The country
will still pay more this year in debt service than
for health and education combined, and will need to
borrow money even to deal with its AIDS epidemic.
Cameroon reached "decision point" in October 2000, when the IMF and World Bank agreed a programme by which creditors will cancel $2 billion of Cameroon's $7.8 billion debt. The reduction is real - debt service in 1998 was $533 million. After HIPC, debt service will fall to $312 mn this year (2000/2001). In addition, the Paris Club has "rescheduled" some of the repayments due next year and the year after - this money must still be repaid, but repayment is deferred.
Thus debt service will fall to $226 mn next year. But this is very temporary. Cameroon will be forced to borrow more than $300 mn per year, according to World Bank estimates, and debt service will rise to $328 million in 2004/5. In effect, each year Cameroon will borrow about the same amount it must repay that year, and each year it will sink deeper in debt.
On 11 January, the World Bank announced a new $50 mn loan to Cameroon as part of its HIV/AIDS programme. The Ministry of Health estimates the number of person who are living with HIV as 937,000. One out of nine sexually active Cameroonians is infected with the HIV virus. Because Cameroon is paying so much in debt service payments to the World Bank and other creditors, it is being forced o borrow yet more money the deal with the AIDS crisis.
"The HIPC Initiative is insufficient and very weak. It will not reduce poverty in a context where debt has reached an unprecedented level despite 12-years of structural adjustment programmes. This result is also very far from the objectives announced by the G7 in Cologne," said Georgine Kengne Djeutane of Cameroon's Jubilee 2000 movement and the Ecumenical Service for Peace. "Once more, the IMF and the World Bank are relentlessly avoiding the real problems, trying to divert us and implementing their unjust policy of exploitation."
According to the World Bank's own data, Cameroon spends about $210 million per year on education and $80 million per year on health. This is less than the $312 million it will spend this year on debt service. Aid grants (that is, money the government can actually use) in 1998 were $278 mn, according to the World Bank. That means all of the aid to Cameroon immediately goes out again to repay debts, so Cameroon must borrow more for health and education. This leads to a new debt trap.
Yet even the World Bank admits that the health and education systems are collapsing. The Bank's "Cameroon Country Assistance Strategy Progress Report" of November 21, 2000 says there has been "little progress" in reducing poverty and, "in particular both the coverage and the quality of the education and health systems remain poor. Cameroon has significantly lower life expectancy, primary school enrollment ratios, and access to safe water than the average low income country . Education quality and enrollment rates have deteriorated to such an extent that the decline is virtually unique for a country that has not experienced civil war or other severe social conflict. After coming close to universal primary education in the late 1980s, enrollment rates have fallen to only 65 percent of the relevant age group in primary education and to less than 50 percent in secondary education. . Similarly, sharp cuts in government spending in the health sector and the decline in household incomes led to reductions in the accessibility, quality, and utilization of health services. A 1998 demographic and health survey found that the chronic malnutrition (stunting) rate of children increased from 23 percent in 1991 to 29 percent in 1998."
Nevertheless, the World Bank and IMF say that Cameroon can spend more on debt service than on health and education - and borrow more money to deal with HIV/AIDS.
Cameroon may receive some additional debt cancellation. The two largest creditors are France ($2 bn before the Paris club cancelled 16 per cent of bilateral debt) and Germany ($1.4 bn). During the 21st French Africa summit on 17-19 January, France announce the "immediate and total cancellation" of the commercial debt dealt with by the Paris Club. This covered 19 countries, including Cameroon. So far there has been no formal action on this announcement.
Indeed, in the Paris Club debt cancellation was calculated without taking into account any possible French cancellation. This works to the advantage of the Cameroon, because it means that if France actually does give the promised cancellation, it will be in addition to maximum HIPC debt relief. If France and Germany did cancel their debts, it would made a significant difference, saving Cameroon more than $100 million a year in debt service payments.
But it seems hard to argue that Cameroon can afford to pay any debt service. Clearly, the entire debt should just be cancelled.
The "other" Paris Club countries, all with debts less than $100 mn, are Finland, Japan, Netherlands, Switzerland, and the United States. The non-Paris Club creditors are China, Kuwait and Saudi Arabia.
Of the bilateral debt, $1.3 billion is post-cut-off date (that is, after 13 December 1988), meaning it is not dealt with under HIPC, $0.9 bn is aid (ODA) debt which should already have been cancelled under promises made by the G7, and $3.3 mn is pre-cut- off commercial debt on which Cameroon has defaulted and which has been nationalised by creditor country governments.
Two key reports are available on the World Bank website:
HIPC Decision point document, 15 Sept 2000 http://www.worldbank.org/hipc/country-cases/country-cases.html
Report No.: 21072, CAMEROON Country Assistance Strategy Progress Report, November 21, 2000 http://www.worldbank.org/html/pic/cas/caslist1.htm
This article by Michela Telatin and Joseph Hanlon, Jubilee Plus, 2 February 2001.
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Message-Id: <200102200116.UAA14998@server.africapolicy.org> From: "APIC" <apic@igc.org> Date: Mon, 19 Feb 2001 20:12:16 -0500 Subject: Africa: Growth Slowing
Editor: Ali B. Ali-Dinar
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