January 9, 2007
LIBREVILLE (Reuters) - Sub-Saharan Africa should maintain a good rate of economic growth this year, but countries should avoid repeating past errors by taking on more debt from a new generation of creditors, the IMF chief said on Tuesday.
Sub-Saharan Africa’s economy should grow more than five percent this year thanks to high commodity prices, debt relief and a favourable world trade environment, International Monetary Fund Managing Director Rodrigo Rato said.
"Economic growth in sub-Saharan Africa will probably exceed five percent this year for the third year in a row and the outlook is also favourable for next year," he said.
The IMF was forecasting late last year growth of 5.9 percent for sub-Saharan Africa in 2007 following a projected 5.4 percent in 2006.
Rato was speaking at the opening of a new IMF Africa Regional Technical Assistance Center (AFRITAC) based in Gabon’s capital Libreville, which will offer technical advice and financial training to central African countries.
Although he named no countries or institutions, Rato warned African nations against the temptation to take on more debt from a new generation of creditors and risk repeating the cycle of the 1970s and 1980s.
"The hard-won gains from debt relief risk being lost if the countries concerned borrow to finance expenses which do not improve their economic situation," he said.
"Nobody wants to repeat the experience of the 1970s and 1980s ... but a new generation of creditors, which did not go through that process, risks repeating the experience," he added.
China, keen to feed its booming economy, has been offering low interest loans, debt relief and other incentives to governments around Africa in return for access to their vast reserves of minerals and oil.
Foreign Minister Li Zhaoxing has signed debt relief and aid agreements with Benin, Equatorial Guinea, Guinea-Bissau, Chad and Central African Republic during a regional tour over the past week alone.
Rato said economic growth in the world’s poorest continent was still not strong enough to keep it on track to meet the so-called Millennium Development Goals, which aim to halve Africa’s poverty by 2015 and combat diseases like malaria.
He said inflation in sub-Saharan Africa, excluding Zimbabwe, was less than 10 percent, the lowest in a quarter of a century, and that debt relief was freeing up additional funds which should be put towards development.
Rato also urged African nations to improve their regulatory environments and make doing business easier for foreign investors to reap the full advantages of expanding trade.
"Recent studies show easy access to the market for new companies, a supple labour market, and transparent and respected property rights are particularly important for trade benefits to be achieved," Rato said.
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