the still precarious situation in neigh-bouring Libya and the unforthcominginvestment from Gulf countries. Withoil at $125 a barrel, the government isforced to subsidise fuel. The worseningdeficit and debt run the risk of devalu-ing the dinar and pushing up inflation.

La Presse newspaper said the budgetwas up 21.8% compared to 2011, withdebt running at 45.9% of GDP com-pared to 44.5% in 2012.

Tunisia-Live.net pointed out that thisbudget saw an increase in spending (of10.8%) over the earlier version. Taxa-tion on the private sector and state-owned company rents will be the twomajor sources financing the increase ingovernment revenue in 2012, it said.

57.3% of income will come from taxa-tion, 20% for rents from state-ownedcompanies in oil, phosphate and otherindustries, 17.1% from foreign loansand the remainder from internal loans,Tunisia-Live.net (9 ⁄ 4) said.

The budget does not deliver a clearmessage that can reassure Tunisians,said economists at a round table heldin Tunis on March 21st reported by theTunisian Press Agency (TAP 23 ⁄ 3).Mohamed Haddar, president of theAssociation of Tunisian Economists(ASECTU) said the government hadopted for ‘‘depreciation of the dinar asone of the solutions to consolidate thestate’s own resources without thinkingabout the repercussions both on thecost of imports and on the debt.’’

Mahmoud Ben Romdhane, an econo-mist, felt that the government had cho-sen to ‘‘plunder state reserves insteadof mobilising new resources’’. Jamel BelHaj, a member of the team that workedout the original draft called the amountof income supposed to come fromtaken over businesses (D 1200m) ‘‘unre-alistic’’, backing up his argument withreference to the poor absorption capac-ity of the local market. Others spoke ofhow the predicted growth rate of 3.5%was dependent on a ‘‘stable social andpolitical climate’’ which remained elu-sive. (Sources as referenced in text) Draft

budget 2012 p. 19305

BANKINGAND MONETARY

AFRICA – IMFAngola

The final payout on the stand-byarrangement is made, despite criti-cism from rights groups.

Completion of the sixth and finalreview under the stand-by arrangement

makes immediately available the finaldisbursement of US$ 132.9m, bringingtotal disbursements under the arrange-ment to $ 1.33bn—the full amountapproved in November 2009.

The 27-month programme, originallyscheduled to expire in February 2012,was extended on February 8th to allowtime for the final review. The IMFcommended the Angolan authorities‘‘for successfully completing the Stand-By Arrangement and achieving theiroverarching objective of restoring mac-roeconomic stability. They undertook asignificant fiscal adjustment, settledlarge domestic arrears, rebuilt foreignreserves, stabilized the exchange rate,and reduced inflation.’’ (IMF 28 ⁄ 3)

But the loan has drawn criticism fromrights groups, AFP reported, whichurged the IMF not to make the finalpayment until Angola resolves a $32bndiscrepancy in its national accounts,equivalent to about one quarter of itsgross domestic product.

‘‘Giving the government millions morein financing when it hasn’t publiclyaccounted for billions sends the wrongmessage,’’ said Karin Lissakers, presi-dent of Revenue Watch, a New York-based group which monitors spendingin resource-rich countries.

Both the IMF andAngola have acknowl-edged the discrepancy, which they blameon spending by the ubiquitous stateoil company Sonangol. (� AFP, Luanda29 ⁄ 3) Loan extension p. 19456

Benin

Modest growth is forecast as $16mis released.

Completion of the third review underthe Extended Credit Facility (ECF),enables immediate disbursement ofabout US$16.4m (bringing total dis-bursements to US$65.7m).

Growth is projected to continue on amodest upward trend in 2012, but willbe adversely affected by external spill-over effects from higher fuel prices—be-cause of the reduction of fuel subsidiesin Nigeria that will dampen domesticdemand—and, to a lesser extent, by theongoing global crisis. Inflation isexpected to increase sharply in 2012.(IMF press release 27 ⁄ 3)

Burkina Faso

Real GDP is forecast to reach 7%in 2012.

Following an IMF team visit to Ouaga-dougou from March 21st to April 4th,the fund said that economic activitydecelerated in 2011, with a real GDPgrowth rate of 4.2% (7.9% in 2010),largely due to lower cereal production

because of drought. There was anincrease in inflation toward the end ofthe year on account of rising foodprices. The current account balanceimproved, reflecting favourable termsof trade and sustained production ofgold and cotton.

‘‘The authorities improved revenue per-formance further in 2011, as a result ofsustained efforts to increase the effi-ciency of tax administration… The fis-cal deficit narrowed to 2.5% of GDP,from 4.5% in 2010.’’

Significant policy challenges in 2012include financing the programme toaddress the domestic food security cri-sis, while hosting a large number of ref-ugees who have fled the recent politicalturmoil in Mali.

‘‘Real GDP is forecast to reach 7% in2012. The current account deficit isexpected to deteriorate to 4.8% ofGDP, due to higher projected importsfor food and the government’s invest-ment programme, as well as higherinternational fuel prices.’’ (IMF pressrelease 4 ⁄ 4)

Comoros

Favourable prospects and growth of2.5% are predicted.

An IMF mission which visited Moroniin March to discuss performance underthe ECF-supported economic pro-gramme, said: ‘‘Economic activity con-tinues gradually trending up. At over2% in 2011, real GDP growth was un-derpinned by strong rain-fed agriculturalproduction and sustained constructionactivities on the back of a pick-up in for-eign direct investment (FDI) and resil-ient transfers from the diaspora. Withinternational fuel and rice price pres-sures on the rise, inflation reached anestimated 7% despite a good harvestand strong supply of locally-producedfoodstuff. The external current accountdeficit increased to 9.5% of GDP, withinvestment imports accounting for asizeable portion of the increase. Reflect-ing enhanced revenue mobilization andwage restraint by the new administra-tion, the domestic primary deficit(excluding a large one-off increase innontax receipts) was contained at 1.4%of GDP (1.6% of GDP in 2010).

‘‘Provided that the reform efforts areintensified, real GDP growth coulddurably exceed the rate of populationexpansion in the medium-term,’’ theIMF said. It predicted growth of 2.5%in 2012, with inflation below 5%, theexternal current account deficit at10.5% of GDP, and the domestic pri-mary budget deficit contained at justover 1% of GDP. (IMF 19 ⁄ 3)

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Cote d’Ivoire

Growth of 8% is expected as thecountry recovers from the post-election crisis.

A statement issued at the end of a Feb-ruary 29th-March 15th visit by an IMFteam to discuss performance under the$616m ECF-supported programmeagreed in November 2011, said agree-ment had been reached in principle forfurther funding. This would take theform of an extended ECF of about$100m to be issued in May.

Economic performance in 2011 wasbetter than expected, said the IMF.Fiscal revenue also rebounded stronglyin the second half of the year helpedby both the rapid recovery of eco-nomic activity and improved collectionefforts. Expenditure stayed within bud-get targets and appropriations forinvestment and pro-poor spendingwere used. The IMF welcomed com-pletion of the civil service census, theapproval of reform to the private sec-tor pension system, the institution ofcommercial courts, the adoption of thelaw on enforcement of arbitral deci-sions, the creation of business supportcentres and the ongoing, complexreform of the coffee-cocoa sector,‘‘essential to a large part of the popu-lation’’. It mentioned problem areasthat needed resolving at some state-owned enterprises, including publicly-owned commercial banks, ensuring theelectricity sector becomes financiallyviable in the medium term, making thenew National Debt Management Com-mittee operational, refinement of strat-egies for the development of thefinancial sector, more flexibility in fuelpricing; controlling the public wagebill and government pension reform.

Economic growth in 2012 is expectedto be around 8% and transport infra-structure will continue to be a majorfocus. (IMF press release 14 ⁄ 3)

Dibouti

A recovery in port activity and tradewith Ethiopia drive growth.

‘‘The macroeconomic environment wasdifficult in 2011, a year marked by oneof the most severe droughts in 60 years,which also affected other countries inthe Horn of Africa, as well as soaringinternational food and oil prices.Despite these exogenous constraints,Djibouti’s economy grew by 4.4% in2011, compared to 3.5% in 2010, dri-ven by the recovery in port activity andtrade with Ethiopia,’’ the IMF said in astatement following a March 6th–19thmission visit to conduct the sixth andfinal review under the ECF-supportedarrangement.

The rise in international prices pushedinflation to 5.1% and aggravated thecurrent account deficit, which climbedfrom 5.8% of GDP in 2010 to 12.6%in 2011. Central bank internationalreserves remained high nonetheless, atUS$228m.

2012 growth is projected at 4.8%, dri-ven primarily by the rebound in portactivity, construction, and services andincreased FDI. (IMF press release 22 ⁄ 3)

Guinea Bissau

High cashew prices help boostincome.

‘‘Guinea-Bissau made further progressin stabilising its economy in 2011. Eco-nomic growth reached 5.3%, driven byexceptional prices for cashew (the pre-dominant export) and a robust cashewharvest. Budgetary and balance of pay-ment stability were sustained. On theinflation front, rising import prices offood and fuel pushed average headlineinflation to 5%, but core inflationremained moderate,’’ said the IMF atthe end of a March 1st-14th mission toassess performance under the ECFapproved in May 2010.

Growth is projected to moderate to4.5% in 2012. ‘‘Domestic economicactivity will be supported by sustainedcashew production, the restoration ofthe public investment programme, andbuoyant construction activity,’’ thefund said.

It pointed out that the objectives of the2012 fiscal programme were unchanged:keep current-year spending withinavailable resources; mobilize more reve-nues; reduce implicit customs subsidiesand exemptions; and tighten controls.However, it also warned that stayingon course was ‘‘critical for sustaininggrowth and reducing poverty.’’ (IMFpress release 12 ⁄ 3)

A military coup took place in Bissauon April 12th. (Aljazeera.com 13 ⁄ 4)

Kenya

Reforms start to produce results butdrought and the debt crisis poseheightened risks.

The IMF advised Kenya that to copewith heightened risks and remainingchallenges, policies should bring domes-tic demand growth in line with that ofsupply in order to improve the externalposition. The current tight monetarypolicy stance should continue untilthere is clear evidence that expectationsof low inflation have taken hold, itsaid. The message followed a February29th-March12th mission for the thirdreview of the $509m ECF approved inJanuary 2011.

The fund said, however, that economicreform had started to produce results:inflation has started to decline, the shil-ling has stabilized, overall public debtis trending downward, and economicgrowth has continued despite thedrought in the Horn of Africa and thesovereign debt crisis in Europe.

GDP is projected to grow at above 5%in 2012 if the impact of the droughtrecedes, security conditions improve,and smooth implementation of the newConstitution proceeds.

The IMF Executive Board is tentativelyscheduled to consider completion of thethird programme review under the ECFarrangement in April 2012. Uponapproval the IMF would disburse thethird tranche of the loan for an amountof about US$110m, bringing disburse-ments under the arrangement to aboutUS$440 m). (IMF press release 12 ⁄ 3)

Lesotho

Loan access is raised by a further25% and $30m plus in fundingreleased.

The IMF on April 9th completed thesecond and third reviews of Lesotho’seconomic performance under an ECF-supported arrangement and approvedan augmentation of access equal to25% of quota, which would lead to atotal access of 145% of quota, aboutUS$77.84m. The decision enabled animmediate disbursement of $30.89m,bringing total disbursements to$51.63 m so far.

The IMF statement said that the econ-omy had performed well despite a sharpreduction in SACU revenues, devastat-ing floods, and high international com-modity prices.. The augmentation ofaccess, supplemented by donor assis-tance, will further support the authori-ties’ reform agenda and cushion theimpact of the shocks on the balance ofpayments. (IMF press release 9 ⁄ 4)

Liberia

High rubber prices and renewed ironore production boost GDP.

Preliminary estimates indicate a boost ofreal GDP growth to 6–7% in 2011, theexchange rate against the US dollar hasbeen broadly stable, and internationalreserves have increased, according to anIMF statement at the end of a missionreview. Strong exports were supportedby high rubber prices and the restart ofiron ore production after more than twodecades. However, persistent high foodand oil prices contributed to increases ininflation and the trade deficit.

The Central Bank of Liberia (CBL)roadmap for capital market develop-

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ment is under preparation and theexpansion of the integrated financialmanagement system is planned toextend into line ministries during 2012.The expansion of iron ore exports willsupport high GDP growth in 2012 andin the medium term. Downward risksare mostly linked to the increased vola-tility of international commodity prices.

The 2013 financial year budget is beingprepared for the first time with a med-ium-term expenditure framework andthe IMF ‘‘strongly supports the author-ities’ plans to expand spending… nota-bly for infrastructure, agriculture andyouth.’’ (IMF press release 15 ⁄ 3)

Mauritius

Imports are up and transfers down,widening the current account deficit.

The Mauritian economy continued itsrecovery in 2011, but growth momen-tum has slowed down in face of anadverse external environment. RealGDP growth is estimated to remain ataround 4%, driven mostly by textiles,ICT, financial services, and real estate.

The banking sector remains robust, andthe system has proved resilient. Bankshave remained liquid and well-capital-ized, with 14.1% of Regulatory Tier Icapital to risk-weighted assets in June.Exports increased some 16% (in dollarterms), with strong growth registeredacross all major tradable industries.Tourism receipts grew some 12% aswell, but a marked decrease in fourthquarter arrivals from key EU marketspoint to a difficult year ahead. On bal-ance, the 17% increase in imports and areduction in net transfers widened thecurrent account deficit to some 10% ofGDP. The deficit was more than coveredwith portfolio inflows and official loandisbursements. (IMF press release 19 ⁄ 3)

Mozambique

Remarkable disinflation is noted anda balance of payments surplusexpected.

Economic activity is estimated to havegrown by 7.4% in 2011, driven to a

large extent by good harvests and abooming mining sector, said an IMFmission which visited on March 5th-16th for the 4th review under the 3-yearpolicy support instrument (PSI, origi-nally approved June 2010).

Real GDP growth in 2012 is expectedto remain close to that of 2011,although subject to downside risks dueto the current global environment.Headline inflation decelerated sharplyfrom its peak of 16.6% at end-2010 to2.5% in February 2012, greatly benefit-ing the poor, and should remain well insingle-digit levels in 2012. This remark-able disinflation reflects the determina-tion of the authorities in tighteningmonetary and fiscal policies, favourabledevelopments of international prices, agood harvest, and a stronger metical.Exports and foreign direct investmenthave remained strong, setting the stagefor a surplus in Mozambique’s balanceof payments and a further strengthen-ing of international reserves in 2012.(IMF press release 16 ⁄ 3)

Niger

Oil and mining, particularly ura-nium, drive strong growth but secu-rity and hunger pose risks.

The IMF on March 16th approved anew arrangement under the ECF forUS$120.97m meaning aboutUS$17.28m can be disbursed immedi-ately.

The new ECF-supported economic pro-gramme aims at addressing the devel-opment challenges ahead, maintainingmacroeconomic stability, and increasingresilience to shocks.

Economic activity in recent years hasbeen affected by large swings in agricul-tural production. Following a year ofserious food shortages, economicgrowth recovered quickly in late 2010,driven by an excellent harvest and theexpansion of services related to agricul-ture

The authorities’ medium-term policyframework is based on a favourablegrowth outlook driven mainly by the

oil and mining sectors. With the startupof a new petroleum project, GDP isprojected to expand by 13.4% in realterms in 2012. Investments in a largenew uranium mine and the develop-ment of the petroleum sector shouldsustain economic activity in the yearsafter 2012.

Niger’s medium-term prospects are nev-ertheless subject to various risks includ-ing recurrent, weather-related foodcrises and fluctuations in commodityprices. The deteriorating security situa-tion in the region is another factor add-ing to Niger’s vulnerabilities. (IMF pressrelease 16 ⁄ 3)

Rwanda

Strong exports and higher inflowscharacterise the economy.

At the conclusion of an IMF missionin Kigali on March 28th, the fund said:‘‘Rwanda’s recent economic perfor-mance has been strong. The growth ofreal GDP exceeded 8% in 2011 and isprojected to be in the range of 7.5–8%for 2012 and 2013. Consumer priceinflation has been steady at close to8% in the last few months—the lowestin the region—helped in part by thereduction in fuel taxes and good har-vest. A larger-than-expected balance ofpayments surplus in 2011 resulted fromstrong export performance, as well asfrom a large increase in official and pri-vate sector inflows. The overall fiscalbalance for the first half of 2011 ⁄ 12was better than projected (by about1% of GDP), mainly reflecting higherdonor support funds (grants and loans)as well as delays in implementingdomestically-financed capital projects.(IMF press release 28 ⁄ 3)

Seychelles

Lower tourism receipts will pushgrowth down to 2.8%.

‘‘Seychelles has weathered well globaleconomic turbulences in 2011. Activityexpanded by an estimated 4.9% drivenby a strong increase in tourist arrivals.Inflation increased to 5½ % at end-

Mauritius: Selected Economic and Financial Indicators, 2009–2017

2009

2010 2011 2012 2013 2014 2015 2016 2017

Prel. Last SR Est. Last SR Proj. Proj. Proj. Proj. Proj. Proj.

GDP per capita (in U.S. dollars) 6,919 7,582 7,990 8,385 8,471 8,403 8,789 9,158 9,649 10,184 10,807Net international reserves(millions of U.S. dollars)

2,150 2,448 2,253 2,636 2,265 2,420 2,512 2,660 2,852 3,035 3,289

GDP at current market prices(bns of Mauritian rupees)

282.0 299.1 327.4 324.8 356.6 350.0 385.9 419.6 456.3 496.5 540.2

Public sector debt (% of GDP) 59.6 57.3 58.8 56.1 59.7 57.0 55.7 54.8 55.5 54.2 49.8

Sources: Mauritian authorities; and IMF staff estimates and projections

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year reflecting mainly the pass-throughof higher international oil and foodprices onto domestic prices,’’ said theIMF on March 12th at the end of atwo-week mission visit.

‘‘In 2012, gross domestic product(GDP) growth is projected to slowdown to 2.8%, mainly due to the wors-ening environment in Europe, Sey-chelles’ main tourism market.Moreover, lower exports of services,continued tensions on international oilmarkets, and the depreciation of theeuro against the dollar are weighingnegatively on the external currentaccount balance. The floating exchangerate has allowed for a quick adjustmentto these factors. With appropriate mac-roeconomic policies, CPI inflation isprojected to decrease to 5% by year-end. (IMF press release 12 ⁄ 3)

Tanzania

The 40% rise in electricity tariffswas necessary.

‘‘Real GDP grew by 6.3% in the firstnine months of 2011 and is expected tohave maintained the pace in the lastquarter of the year. For 2012 ⁄ 13,growth is projected in the 6.5–7%range. Consumer price inflation was19.8% year-on-year in December 2011,primarily because of higher interna-tional food and oil prices, and the pass-through from the depreciation of theshilling. Core inflation, which excludesvolatile food and energy prices, reached8.7%,’’ said the IMF after a March 1st –14th mission visit.

The Fund commented that ‘‘the emer-gency power plan (EPP), implementedby the authorities in 2011, had helpedto address drought-related power short-ages. The increase in electricity tariffsby 40% in January 2012 was an impor-tant step in covering the associatedhigher cost of power generation.

The IMF’s Executive Board is expectedto consider the fourth PSI review andthe request for the precautionary SCF(Stand-by Credit Facility) in June.(IMF press release14 ⁄ 3)

Uganda

A conservative fiscal policy isadvocated.

An IMF review visit on March 7th-21stconcluded that Uganda faces a numberof important economic policy chal-lenges, including high inflation, slowereconomic growth, and a relatively widecurrent account deficit. It welcomedboth the Bank of Uganda’s intention topursue a cautious pace of monetaryeasing in line with disinflation and theauthorities’ intention to maintain a

conservative fiscal policy while alsoembarking on infrastructure investmentprojects.

Looking to 2012 ⁄ 13 and the mediumterm, the mission encouraged theauthorities to eliminate a number oftax exemptions and incentives, and tocarefully evaluate all remaining taxincentives on ‘‘value-for-money’’grounds. (IMF press release 22 ⁄ 3)

Zambia

Copper production and non-maizeagriculture increase.

Real GDP growth is estimated at 6.5%in 2011 and is projected at 7.7% in 2012,reflecting strong growth in copper pro-duction and non-maize agriculture, andan expansionary fiscal policy. Inflationdeclined to 7.2% at end-2011, broadly inline with the authorities’ target, and isprojected to end 2012 close to its Febru-ary 2012 level of 6%. The 2012 budgettargets a widening of the fiscal deficit to4.1% of GDP driven by a significantramp up of investment. Despite copperprices rising to record highs, the externalcurrent account surplus narrowed sub-stantially in 2011, mainly reflecting astrong expansion in imports and adecline in grants. For 2012, the current

account surplus is projected to remainbroadly unchanged, while gross interna-tional reserves are expected to continueto grow, reaching the equivalent of 3.3months of prospective imports, said theIMF after a March visit.

Key areas for the future will include:

(1) tax policy, tax administration, and publicfinancial management to create fiscalspace for increased infrastructure spendingand improve technical capacity;

(2) maize marketing and pricing policies andthe development of a reform strategy foragriculture;

(3) increasing access to financial services bySMEs without jeopardizing financialsector stability; and

(4) removing the incentives for the prolifera-tion of informal business. (IMF pressrelease 13 ⁄ 3)

GUINEAParis Club Deal

Debt alleviation and cancellation willfree funds for poverty reduction.

The Paris Club of creditor nations onApril 11th agreed to alleviate Guinea’sexternal public debt, following the IMF’sapproval of a new three-year arrange-ment on February 24th (p. 19452).

The agreement would give US$344m indebt relief to Guinea, including morethan $151m cancelled. The measures areexpected to reduce debt service (includ-ing the arrears) between January 1st2012 and December 31st 2014 by 84%.

The stock of debt owed to Paris Clubcreditors by Guinea as of January 1st2012 was estimated to be more thanUS$750m in nominal terms.

Creditors also agreed, ‘on an exceptionalbasis’’ to defer and reschedule over aneight-year period the repayment ofmaturities due …on short term and postcut-off date debts; and, over a three-yearperiod the arrears on those claims. Theyalso agreed to defer all the interest dueon the amounts treated.

Guinea pledged to devote the resourcesfreed up to priority areas identified inthe Poverty Reduction Strategy. It willalso now seek comparable treatmentfrom its private and non-Paris Clubbilateral creditors. (PANA, Paris 11 ⁄ 4)New ECF arrangement p. 19452

KENYALoan Renegotiation

Sustainable repayment terms aresought.

Kenya wants to renegotiate the termsand conditions of a Sh50bn loan itsought from international financiers

Egypt

Filling the Deficit

Finance Minister Mumtaz Said said mid-March that the government deficit wasnot as bad as announced earlier, but thefigure still exceeds what had been fore-cast for the fiscal year ending in June.

On March 12th, ministry official AbdelAziz Tantawi said the budget deficitwould grow to E£150bn (compared withan estimate of E£134bn when the budgetwas finalised). Mumtaz Said said recentmeasures ‘‘had succeeded,’’ and theshortfall would be only E£144bn.

His remarks coincided with talks withthe IMF for a $3.2bn loan to shore upthe economy. Foreign currency reservesfell from $36bn at the start of the year to$15.5bn at the end of February, accord-ing to the central bank. (AFP, Cairo13 ⁄ 3 2012)

An IMF staff mission was in the countryfrom March 25th to April 10th to discussthe loan application. It said it would‘‘remain in close contact with the author-ities in the coming weeks as they finalizeremaining details of their economic pro-gramme, including the 2012 ⁄ 13 budget,and mobilise the required political sup-port. A financial arrangement to supportEgypt’s economic programme will bepresented to the IMF Executive Boardonce this work is completed, and externalfinancing from bilateral donors and otherinternational institutions is confirmed.’’(IMF press release 10 ⁄ 4)

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