James Alic Garang, the Central Bank Governor of South Sudan, in this interaction on the sidelines of the recently concluded International Monetary Fund/World Bank meeting in Washington DC, speaks on the outcome of the engagements and what the third seat secured by Africa on the IMF Executive Board means for the continent.
How will you describe the global economic outlook?
The economic outlook has turned out to be what it was perceived three years ago. The situation is such that the growth of the global economy is resilient and improving but not even. That means that there are some regions, some countries where the economic growth prospects are very positive. But there are also other regions where the growth dynamics are not favourable. That is the headline message.
The second headline message is on inflation. Inflation is straightening down generally on the average but is not turning down everywhere. If you bring it down to the regions, let’s say sub-Saharan Africa, inflation remains very high in most places.
On the issue of the financial sector, at the global level, risks have shifted from places where they used not to be to places where they are today. Let us say for instance the real estate in places like Asia including China. There are vulnerabilities in the financial sector that need to be looked at.
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Now there are major challenges from climate change to geopolitical tension to the wars to the few outbreaks of diseases such as smallpox for example and a few others; and the volatilities that we see in the financial sector from asset prices to commodity prices. So those are the headline messages, some of which are challenges.
Now what are the prepared policy options that are laid out there for policy makers to look at? There are a range of policy options across four broad areas. One on fiscal policy, one on monetary policy, one on financial sector policy and on structural policy. Without going in-depth, I will just highlight a few of them.
On the fiscal side, the key recommendations are the need for authorities to build buffers, to create fiscal space and ensure debt sustainability.
What was the takeaway from the meeting on the part of the financial sector?
On the side of the financial sector, the key message has been to strengthen resilience and stand ready to respond when those volatilities do arise. As I said earlier, traditionally, we were certain where the risks were but today the risks have shifted to the real sector, the housing sector.
For Africa, the biggest development so far has been the addition of a third share at the side of the IMF. Sub-Saharan Africa, since 1979, has been pushing to increase our representation and to sit at the table.
One of those has been the endorsement by the IMF board during their meeting that by November 1st, Africa will have three shares. There will be Group 1, Group 2 and Group 3. Traditionally, there used to be clash between the Francophone and English speaking. But with the addition of the third share, it is not so much about the language now. It is now about the regions. So, we have the West African group, the Southern Africa group and the Eastern Africa group. These are the three shares.
We are very happy that our call, for almost fifty years we have been calling for one more seat to be added. This time, African Ministers of Finance and Central Bank Governors, we were able to push this and it has gone through. So this is one of the biggest achievements that have happened so far.
You spoke about the vulnerability in the global economy as well as in the region. What steps are you taking as the Central Bank governor to ensure financial system stability in your country?
I was speaking broadly, but if you want to bring it back to the region and to South Sudan, yes I can do that.
What I can say is that on the side of the financial sector, we are working very hard to ensure that some of the banks which are undercapitalised are capitalised; and there is a process to do that. On the risks that are coming from outside. Some of the risks come from the disruption to the exports, when the export sector is disrupted, you would see that the inflows are affected.
You have to ensure that whatever disruptions that are there are being managed and then you ensure that the risks that would be migrating from the financial sector are not being blown over to the real sector and we are doing our best in the region.
My question has to do with the extra seats. I know that the same argument has been made for the Security Council. For you, what will these extra seats mean?
I say we look at it in two ways. One is from the symbolic perspective. When you have a seat at the table, you are seen like equals. So the third seat that we have had, it enhanced our equality. But what it does is that our voice on governance matters on the IMF Board is now increasing. Instead of two people speaking on behalf of Africa, we have three now who would be using their voice and clout to push for Africa.
When it also comes to requests for resources, you know that from time to time, countries come to the IMF to request for loans to stabilise the macro environment, those requests sometimes are not easy. There is a huge advocacy that goes behind the scene and there are push backs from other countries.
So when you have three people pushing and advocating for Africa, you are likely to secure more resources than what it used to be.
In terms of the numbers also, when you are comparing 24 total shares; now you have 25 shares. So there is strength there and it is a plus for Africa. Of course we are yet to operationalise fully but already all the three groups, we have put in place structures, some of which are intended to bring out a number of good principles ensuring that all the African countries are represented.
There is a rotation even among those three shares. It is no longer one country in Africa sitting. I cannot say that the three shares will resolve all the problems we have in Africa, but it is a step in the right direction.
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