IMF uses Mauritius as model to drive Senegal to emerging economy status
International Monetary Fund Managing Director Christine Lagarde (L) meets with Senegal’s Prime Minister Mahammed Dionne (R) on January 30, 2015 in Dakar, Senegal. (Image: Stephen Jaffe/IMF via Getty Images)
Last Thursday, Christine Lagarde, head of the International Monetary Fund (IMF) visited Senegal to renew her support for economic reform in the country and for investment in those countries in west Africa worst hit by the Ebola virus.
This visit gathered momentum from a conference held recently where the IMF welcomed emerging low-income economies such as Senegal to make a decisive turn toward middle-income status and share experiences through a three-day peer-to-peer exchange with officials from Cape Verde, Mauritius and Seychelles.
The conference themed ‘Transforming Senegal into an Emerging Economy” was held in the format of a brainstorming session, in person and via teleconference, with a delegation from Senegal on December 15 to 17, 2014.
And, the experience of other countries such as Cape Verde, Mauritius and Seychelles, suggests that Senegal’s ambition is achievable indeed.
These African “lion” emerging economies, such as Cape Verde, Mauritius, and Seychelles, have already traversed the journey undertaken by Asian “tiger” economies such as India, Guyana, and Sri Lanka, to move from low-income to middle-income emerging market status.
The “Plan Senegal Emergent” was discussed and supported by the IMF Executive Board in the context of Senegal’s 2014 Article IV consultations during this peer learning conference. It is designed to help Senegal exit the trap of low growth and high poverty of recent years and make it an emerging economy within the next two decades.
The strategy was structured around several pillars—growth through transformation and diversification; human development and social protection; and better governance, peace, and security—the plan envisages reforms to unlock inclusive growth. Scaling up of investment—public and private, domestic and foreign—in growth-enhancing projects, infrastructure, and human capital would allow Senegal to move to middle-income status within the lifespan of the current generation.
In all, between 1990 and 2013, about 40 countries across the world have achieved average growth of 5 percent or more in real per capita GDP at PPP (purchasing power parity).
International experience, in fact, suggests that Senegal can be even more ambitious and lift its growth rate to 7 percent in the medium term, driven by domestic reforms and foreign investment–generated exports.
“The path to reforms is full of challenges at the implementation phase. Issues are the same, irrespective of the country and level of development, although not of the same dimension — capacity to implement projects, monitoring, evaluation, budgeting. Peer learning is a good platform to focus on ‘how-to’ experiences. Hearing from practitioners helps understand challenges, learn from failures, and get different perspectives on issues,” says Khoudijah Boodoo, Board of Investment, Mauritius.
From the outset, the Senegalese delegation emphasized that rather than discussing what to do, the brainstorming should focus on how to do it, as all priority reforms needed for Senegal are already listed in the Plan Senegal Emergent. With topics selected by the authorities, sharing of first-hand experience by peers and experts generated the following priorities: Revenue public expenditure, public financial management, capacity building, and Social protection
The current conference was built on the lines of the model of a peer-learning seminar in Mauritius a month earlier that explored the path for middle-income economies that are pushing forward towards a high-income status.
That event, which emphasised building on past success, noted that small middle-income countries in sub-Saharan Africa have now set themselves the challenge of reaching high-income status and avoiding the middle-income trap. While still positive, growth has slowed, as previous growth drivers weaken and the rise in per capita income wanes.
That seminar brought together 18 senior officials from seven small middle-income countries in Africa at the Africa Training Institute in Mauritius. The participants agreed that peer learning offers untapped potential to help move reforms forward in their countries.
The seminar held in Mauritius also assessed different possibilities to avoid the middle-income trap.
The seven small middle-income countries facing this trap in sub-Saharan Africa are Botswana, Cape Verde, Lesotho, Mauritius, Namibia, Seychelles, and Swaziland. The seminar examined common policy challenges these countries face, reviewed what individual countries have done to address them, and how IMF surveillance can build on successful approaches to help countries move forward.
Finally, the seven small nations made the consensus based on Building sufficient policy buffers, policies to reduce skills mismatch policies to boost productivity financial inclusion building support Benefits of peer learning in order to avoid the Middle –income trap.
The outcome of the conference focuses on specific implementation programs, which can proved beneficial to Mauritius.