Loomnie

Maybe a fallout of the current global crisis is a kindler, gentler IMF. The Fund just published a staff position note titled Fiscal Policy in Sub-Saharan Africa in Response to the Impact of the Global Crisis

The executive summary:

The global financial crisis poses significant challenges to fiscal policies in Sub-Saharan African countries. Growth will weaken considerably as export prices and volumes, remittances, tourism, and capital flows decline. The fiscal effects of the crisis are likely to be large and to operate mainly via revenue losses, with commodity-related revenues particularly hard hit.

Countries will need to weigh their options for fiscal policy responses. Countries with output gaps and sustainable debt and financing options have scope to implement expansionary policies, by letting automatic stabilizers work, accommodating declines in commodity-related revenues, and in some cases implementing discretionary fiscal stimulus. The main focus of fiscal stimulus should be on the expenditure side, particularly infrastructure and social spending given pressing needs, as reducing tax rates may be inequitable and the scope for doing so is limited given low revenue ratios. Other countries will have to adjust, in a way that will not affect critical spending. Additional donor support would reduce the need for adjustment. In all cases, countries should give priority to expanding social safety nets as needed to cushion the impact of the crisis on the poor.

Hat-Tip to Dani Rodrik. His comments on the policy note are here.

Much has been made by the IMF of emerging markets (.pdf) in Africa. Dani Rodrik looks at what happens in the current period where rich countries, especially the US, are in a ‘slowdown’, and there is much anti-globalisation sentiments among Americans. Add to this a not-so-hospitable disposition towards exports from developing countries (actually, China is the biggest deal, and for outsourcing, India), an American current-account deficit of $739 billion (5.3% of its GDP), and an emerging markets and oil-exporting countries surplus of $631 billion and you have a recipe for protectionism in developed countries. He concludes by writing:

Long-term success still depends on what happens at home rather than abroad. What is moderately bad news at the moment will become terrible news only if economic distress in the advanced countries – especially the US – is allowed to morph into xenophobia and all-out protectionism; if large emerging markets such as China, India, and Brazil fail to realize that they have become too important to free ride on global economic governance; and if, as a consequence, others overreact by turning their back on the world economy and pursue autarkic policies.

Of course, a lot depends on what happens inside developing countries. Rodrik is big with institutions, and I am firmly with him on that; institutions matter, and in really serious ways. But so does the international policy environment. I am concerned with what happens if an all-out protectionism breaks out. But then, why do I fear for Nigeria? It is not like we export anything, right? As long as there is still oil we are fine. Anybody says non?

Rodrik’s full article, part of Project Syndicate, is here. The post announcing the article is on Dani Rodrik’s blog here.

I just discovered the Project Syndicate site…. I am not yet done exploring it, but I think it promises to be interesting. The objectives, according to the home page, are:

- bringing distinguished voices from across the world to local audiences everywhere;
- strengthening the independence of printed media in transition and developing countries;
- upgrading their journalistic, editorial, and business capacities.

The list of contributors include Jeffrey Sachs, Joseph Stiglitz, Dani Rodrik, Kenneth Rogoff, and Joschka Fischer, among others. If you have time you could check it out… http://www.project-syndicate.org/