IMF: EU Trade Deal Could Hit African States Budgets
New trade pacts proposed by the EU could put pressure on poor African nations budgets by cutting customs revenues, a concern which needs to be addressed in negotiations, the International Monetary Funds (IMF) Director for Africa said Thursday.
Abdoulaye Bio-Tchane said that African governments have expressed concerns to the Fund that the Economic Partnership Agreements (EPAs), which would grant the EU tariff-free access to African markets except for a few sensitive goods, could weaken regional trade between African nations by flooding markets with European goods.
The IMF calculates that for the poor nations of the West African Economic and Monetary Union the EPAs will mean a fall in tax revenues equivalent to 2 percent of GDP.
– It is not a very small thing. The long term impact of the discussion will certainly be positive to the Africans but you need to address the short-term concerns that are being raised by the Africans as well, Bio-Tchane noted.
Meanwhile, the IMF said Thursday that foreign investment in sub-Saharan Africa should top 20 billion US dollar this year as Chinese and Arab investors pour in money, but a US slowdown could jeopardize the strongest economic growth in decades.
– My sense is that foreign investment will continue rising and particularly in non-resource sectors, Bio-Tchane said, adding: – The level of investment which we saw in 2006, will clearly be surpassed this year. The trend is to have more Chinese, more Arab investors.
While rising foreign investment could help curb poverty in Africa, large capital inflows also test African governments ability to ensure transparency, control inflation and the exchange rate, Bio-Tchane explained.
Among the required reforms, Bio-Tchane cited a reduction in state ownership of the banking sector and an improvement in access to credit through stronger legal guarantees: – People want to invest in Africa and Africa needs investment so you have pressure from two sides for change, he stressed.
Bio- Tchane said that many African countries would not meet the MDGs (2015 Målene) at their current levels of growth. They would need to speed up their GDP growth rate.
According to him, meeting the MDGs may be unlikely for most countries in sub-Saharan Africa, but some are forging ahead. He cited Mozambique as a good example, saying that in spite of floods and higher petroleum prices, its economy grew at 8,5 percent in 2006.
Kilde: www.worldbank.org
