IMF Urges East Africa Nations to Use Good Times to Build Buffersby
Nations growing by more than 5% on public spending, oil prices
States should focus on cutting debt, building reserves
East African nations with economic growth outpacing others on the continent should use the current good times to create cushions against inevitable tough periods, the International Monetary Fund’s director for Africa said.
While sub-Saharan Africa’s economic growth is expected to slow to 1.4 percent this year, nations such as Kenya and Rwanda forecast 6 percent expansion as they benefit from lower oil prices and public spending on infrastructure projects. Gross domestic product in Tanzania, which holds natural gas reserves of as much as 58 trillion cubic feet, could grow by more than 7 percent, according to government estimates.
“We have a saying in my country that the time to build a roof is when the sun is shining,” IMF’s Abebe Selassie said in an interview in the northern Tanzanian city of Arusha on Oct. 31. “So this is the time to make sure that buffers are being built, economies are being strengthened to be able to be robust to deal with any shocks that might affect these economies in the coming years.”
Countries should strike a balance between addressing their needs and making sure that their debt doesn’t get out of control, he said. The focus should also be on narrowing fiscal deficits and building up foreign exchange reserves, Selassie said.
Kenya, East Africa’s biggest economy, and Rwanda are exposed to future external shocks because of their high levels of debt, according to the IMF.
Kenya plans to cut back spending in the fiscal year through June 2017 by a tenth and to slash net foreign financing by a quarter to 287.6 billion shillings ($2.83 billion), according to its Treasury. The $63.4 billion economy holds public debt equal to 47.4 percent of its GDP, the government said. The World Bank estimates the loans could be as high as 55.1 percent of GDP.
“Subject to government sticking to its program of doing the fiscal consolidation, the debt issue should be manageable,” Selassie said, referring to Kenya’s loans.