 Thanks to the presenters for three certainly wonderful discussions of the macro issues, and indeed some of the more contemporary macro issues and what they mean for development. My discussions will essentially focus on sub-Saharan Africa generally. I think that it is fair to say again from the discussions in the last couple of days that the vulnerability of economic growth still remains particularly for sub-Saharan Africa. And indeed that vulnerability is also compounded by the issues of the lack of structural transformation that has actually taken place in a lot of the African economies. In my mind, I mean, apart from the structural transformation issues, I guess other factors that have impacted on the vulnerability or the growth vulnerability have to do with the quality of institutions, but more so the fiscal challenges, the limited fiscal space that the typical sub-Saharan African country today indeed faces. The implication, of course, then means that effective counter-cyclical macro management policies have actually been quite limited. But in that light I want to talk on three main issues that I think we need to reflect on in thinking about macroeconomics and development today. One has to do with the fiscal management challenges, which is still very much present in the developing world today, particularly also sub-Saharan Africa. That manifests itself in very, well, I wouldn't say, okay, so I want to be politically correct. So let's just say that most countries have very large public sector, which is actually imposing quite a big strain on the fiscal budgets. But also I think that in this whole move or democratization that has actually been the wave of democratization in sub-Saharan Africa, one sees this link between the electoral cycles and budget deficits actually being quite large and quite strong. And also with respect to fiscal management, I think that somehow the fiscal challenges have become structural in nature. And so you find that for most sub-Saharan African countries, fiscal space tends to be quite limited. And I would touch on this point again in a minute or so. A second related issue and one that was alluded to by Tony has to do with this tension to actually invest, if you like, to actually grow economies against the challenges of increasing the debt situation in African economies. Debt ratios are definitely worsening. I mean, so for Ghana, there has been indeed last year, the government gave some indication of what the debt ratios were. And then the IMF also gave some indication of what they thought the debt ratios were. I think in the end they've accepted what the IMF. But it certainly is a problem and the debt ratios today in Ghana is higher than what they were pre-hippic. So clearly you've actually in the last 10 years, you've been able to literally ramp up your debt to the situation before you actually got debt relief. And I think it's certainly a big issue that we need to actually reflect more on. And the problem isn't going away. Like we have heard, Sub-Saharan Africa has huge infrastructure deficit gaps that has to be filled. Plus the fact that a number of them have now become oil producers and so expectations have changed with respect to what governments or the state can provide. And somehow that has also been used as an excuse to also go on a spending spree. But also in thinking about the debt issue, I think one needs to reflect on the fact that there is an alternative and viable donor on the block in the form of the brakes. China in particular. And so in addition to the traditional sources, now you have another donor where the dynamics with respect to the official inflows are a bit different. So and like I mentioned the appetite for borrowing has actually gone quite through the roof. Like Tony said, Ghana is actually issuing a bond and it's suspected that the interest rate is going to be around 10 or so percent, which reflects the risk associated with actually lending to Ghana. So that issue is certainly one issue that I think macro issues will need to reflect a bit more on. Actually I think it's the issue of fiscal space generally within South Africa. In the past, I mean the easiest sources of fiscal space that the African economies have relied on were of course international trade taxes and then mid 80s came foreign aid, natural resource rents, now the natural resource rents are emerging. But of course foreign aid for some of the countries seem to be dwindling. And therefore and of course the deficits and the debt situation also means that even borrowing deficit financing is becoming more of a challenge in terms of the cost of it. And you hear talk about the oil revenues. But I mean strictly speaking for as at least as of now the revenues from oil for countries such as Ghana isn't that great compared to what even its deficits are. So if you plugged all the oil revenues into deficits it will only do this much. I think it's roughly around 30-40 percent of the deficits. So it isn't much at all. Now you tend to hear the discussions relating to fiscal space almost centered on tax revenue and indeed natural resource rents. And I think in my mind we need to focus a bit more on creating fiscal space from the expenditure side of things. It hasn't necessarily been given that much attention particularly that's relating to the efficiency of spending. And so of course most African economies Uganda, Kenya, Ghana are all now implementing the what they call the integrated financial management information systems. It's great it will help certainly reduce waste in the system but it is not a panacea for actually improving the efficiency of spending in South Africa. Use of ring fencing of funds within consolidated budgets, value for money, of course corruption, prioritization of spending itself still remains quite problematic. So in my mind I think that discussions of the macro issues cannot really decouple discussions on the growth issues from discussions on the governance issues and I mean governance which will include not just the economic governance but also political governance. Thank you very much. Robert, would you introduce yourself? Okay, so I'm Robert. Yeah, use the microphone. My name is Robert Ossay. I'm currently here at WIDA as a vested scholar but my home is University of Ghana. Thank you. Peter, maybe you should also begin introducing yourself and then. Okay, yeah. Good morning or afternoon. Let me also introduce myself. I'm Peter Cuote from University of Ghana and I'm the head of economics department. I'm curious that both respondents are from Ghana. And also an alumni of the AERC network. Thank you very much. I think I will quickly touch on some of the key issues from the presentation. There's one basic factor that is the political economy story. I think my colleague Robert touched on that briefly but it is something that we seriously have to look at in Africa. It's a wave in Africa where we want democracy and it's quite expensive. So what we see is the political business cycle which fits into fiscal deficits during election years. A lot of spending is done, very uncoordinated and the years after resources and time is spent to clean this huge deficit and that has serious implications for macro stability. The tax phase is also a big problem in terms of resource mobilization. In the recent finance and development conference in Ethiopia, they happened to meet some of the pairs of the Treasury. And one thing that came out clear, it's not the basic, the tax collection, income tax and the rest. It is multinational companies in African countries. They are very much ahead of the tax authorities. So they end up, should I say, avoiding or evading taxes. It's quite legal within the framework. They know the laws much more than the tax authorities. So there is a suggestion that we have a regional consortium of tax experts to detect some of these evasions and I think it is one of the ways forward. Then we have aid and in the middle income status. You wake up one day and you are told you are middle income because your GDP has been rebased. Once you become a middle income, you can't assess some of the constituent borrowing from the World Bank and other sources. So for the sovereign bond and other sources of income or raising revenue becomes your target. And that is leading to a lot of debt sustainability issues. Currently, Ghana's debt is about 70.2 percent of GDP. But it's above the threshold of debt sustainability. And I think if you are not careful, we will push countries into debt. You can't call it HEPIC because now they are middle income countries. So you need a new acronym for them. Another way is price stability inflation targeting. I mean New Zealand, Canada and the rest. These table prices with its price stability. And many countries have pursued this and have seen the benefit. The ECOWAS in West Africa, the ECOWAS convergence criteria, requires that we have single-digit inflation. So you see many African countries, especially West African countries, trying to achieve that target. But the condition is that if you have an independent central bank, low fiscal deficit and deficit financing should be low. Now you ask yourself, are central banks really independent in Africa? If you even look at the processes, I'm sure the deputy governor here would attest to that. When appointed, at least he questions how far they can be independent. So what you see is the central bank's financing government, government fiscal deficits, and it becomes a major challenge. The other aspect is they need to know which rate of inflation is optimal. The single-digit inflation, the optimal rate of inflation, and for many of these countries, this has not been estimated. I have read quite a few studies, including one from the IMF, which states that any rate between 16 to about 20 percent is OK for a developing country because we know the trade off between inflation and unemployment. So if you continue to target single-digit and there's high unemployment, of course, then we are creating problems for the macroeconomy. Yesterday, we heard from those who attended the session, Lynn Nosellestein presented the book Launch. I was going to talk about regional integration, and he brought out this controversial issue that regional integration is not right for Africa. I'm glad the chair disagreed with him because on the financial aspect, you need financial integration. Yes, we can even go beyond that. There are some African countries that are landlocked, and before they can reach the international market, they have to route their exports through regional markets or other countries, neighboring countries. So if you don't develop regional infrastructure, then, of course, they cannot even reach international markets. Then, of course, the issue of regional security, not a year ago, we were invited to the U.S. Congress House of Commons to debate on security issues, and it was quite clear that that is the way to go. If you want to check regional crime, you need regional integration, finance regional infrastructure, and there are. So I think there is the need for regional integration to finance trade and provide finance for macro stability. Lastly, the chairman, globalization, I think the earlier presenters spoke about globalization. It brings cost and benefits. There are severe costs as well as benefits. Many African manufacturers have disappeared, and in fact, when I was a graduate student, I used to go for data collection. For industrial enclave, now when I drive past that place, I become saddened, they become distribution networks, they become churches, they fall collapse, and it is quite sad to see the extent to which we have allowed, we have not taken advantage of globalization, rather we are losing. Then the IMF, I would say, Tony, who also happens to be my former lecturer at Warwick, the IMF is the second best option for us. We had homegrown policies that we thought would have improved our macro conditions, but that did not help. At the time IMF came in, we had no option because there was a lot of currency, volatility, and macro instability, so we needed somebody to crack the whip, and it was the IMF. But then the recent assessment by the IMF shows clearly that performance has been very satisfactory. It's not been too good. One thing I like about the IMF and the assessment is that the recommendation that we should budget for 2016 elections. During election years, we don't follow the budget, we throw the budget out of gear. In 2012, deficit was about 12% of GDP, and you can imagine the toll on the macro economy. So that is the best I can say for IMF. In conclusion, we need macro stability. Stability has been better in recent years than before. However, we need countries-specific policies, one-size-fits-all will not work. The increase in borrowing by low-middle-income countries at commercial rates can lead to severe debt problems, and I think we need to check this carefully. And lastly, the earlier presenter spoke about financial deepening. I think Tony spoke about financial deepening. Yes, it has improved, but then it has come with a lot of microfinance institutions, and a lot of the poor are getting indebted because they charge very high interest rates, sometimes about 10% per month, and these are not sustainable. And I think we need proper regulations to check some of these challenges. Thank you very much. Thank you, Peter. By the way, I'm going to borrow 15 minutes from maybe lunch hour. I think that we should have questions and comments, and be brief and to the point. Let me begin further, and also introduce yourself. Thanks. My name is Munale Rajuma from the South African Treasury. I'm just wondering, I mean, in the context of this talk about monetary policy normalization, so I'm wondering to what degree has the last few years altered the transmission mechanisms to a state that maybe interest rates and inflation have moved structurally lower. So in that type of a world, to what degree then does it mean that the monetary policy anchors, as we know them, as we have defined them, are not in line with the new norm? In other words, has the environment not offered enough opportunities that inflation targets in developing countries should be adjusted lower and tightened a little bit more? Thank you. By the way, I initially sort of taking three and then reactions, but I'm going to think I'm thinking of taking all the questions, and then I think that they will save some time. Yes, Itamana Thokam from Botswana. Both speakers, I realized that the presentations were made in the context of a deficit, a monetary deficit type environment. I actually, in my former life as a policymaker at the Central Bank in Botswana, was working in a surplus environment. And in a surplus environment, you have significant foreign exchange reserves, your balance of payments, surpluses, so your constraints are different. The impossible trinity doesn't hold necessarily in a surplus environment because you have adequate resources too, so your flexibilities are different. You can actually have multiple objectives, but my experience when I was abroad was working with countries which had, were operating in deficit environments. And it was then that I saw the significance of, understood the importance of recognizing the differences. And because African countries are moving more towards, I mean there are more countries looking to export, become mineral exporters per se. My personal thinking is that maybe it is important for policy makers to study both types of regimes and have a broader understanding, especially if self-insurance. Botswana has survived the last financial crisis because of its self-insurance, being vulnerable to multiple shocks. So all those things are the sort of things that come up in a surplus environment. So I just wanted to... I'm going to exhaust this side and then come... Go ahead, please. Please introduce yourself. I'm Alan Rowe, retired from the University of Warwick, but I also, in my past life, worked for AARC 20 years ago. I want to refer to Stephen Connell's Chris Adams diagram on Tanzania. I use the same diagram in another context using Angus Madison's data, but going back to 1950, I think it's very true that the... If you look at the growth per capita income in Tanzania, you've only had five or more consecutive years of positive growth after 1996-97. Go back to 1950, you can't find those years. But in my diagram, I put an arrow in 1996 saying this is when Tanzania reformed its... Not only its macro policies, but also its mining legislation. What happened? Huge inflow of foreign exchange initially into the gold sector, which transformed the export composition of Tanzania's exports by the middle 2000s. And now, of course, we're getting an even bigger explosion of foreign direct investment on the back of the oil and gas investments that are taking place. Now, the point being, I find it... You were careful the way you put it, Stephen, but I find it difficult to disentangle the impact on growth coming from the macro reforms, which I absolutely agree took place. And it's one of the few elements of the Washington consensus that I think actually did good things for Africa, these reforms in macro management. I'm hard to disentangle that from the impact of the sectoral effects through the arrival of the gold mining investment in huge amounts, which made gold very quickly the largest export from the country. And I think this is a rather pessimistic point as well, because if we are saying that the recovery of growth has been associated with the commodity boom, rather than more with better macro management, the perspective looking forward, as Toni Addison referred to it, looks pretty negative, because we're now in the downswing of the commodity cycle. And unless we have rather sort of inflated faith in that ending quite quickly, it's very hard to see how this is not going to quickly translate into a quite serious macro problem. Thank you very much. Let me come, please. I'm on this side, three and three, and then we'll see if we have them. Go ahead. Thank you. I'm from Vietnam. I just have two questions for the presenters. That's for me, for developing countries, I wonder if the floating exchange rate or stable exchange rate is better for them. For our opinion, for floating exchange rates, that only encourage hot money to come in, just come in, easy come in, easy come out. And you don't, with floating exchange rate in developing countries, you don't encourage the FDI for indirect investment to come in, because that you don't have a mechanism to insure for risk of exchange rate, the first question. And for second question is that for developing countries, the ongoing phase limited capital to invest, especially for infrastructure. So that they have only choice, for my opinion, that to follow the unbalanced growth strategy. That's Hirstman I pocketed many years ago. But for this strategy, only suitable for centralized economies like China, like Vietnam, it is easy for the centralized government to allocate our capital for this province, not the other. So for democracy countries, that's the moment, how can they solve the problem for unbalanced growth with democracy? Thank you very much for this very insightful presentation. My name is Abdulasek from Shek Antojob University in Dakar, Senegal. So I have one very quick question, which is what do we know about the political economic context of macroeconomic management in the specific context of Africa? And to what extent does it affect the effectiveness of macroeconomic policies? Because I think a lot has been said about what kind of policies we should be implementing, but what seems to be missing in our debate is the political environment in which these policies are designed and also take place. And I think it has some implication in terms of its effectiveness, especially because some people mention raise the issue of elections and also independence of central banks. So I think these are some important points that need to be considered when we talk about macroeconomic issues in Africa. Okay, one more question from this side and then we'll get reactions. Wei, in the back. Introduce. Thank you so much. My name is Vladimir Pokov. I'm working for the United Nations Department of Economic and Social Affairs, but I was associated with wider 4,000 years. Now, the question is for someone who is substituting for Chris Adams. Sorry, I missed your name. You, Steven, yes, you argued that Chinese policy is not for Africa, that Joe Stiglitz's argument that you're supposed to underprice with exchange rate is possible only if your savings rate is 60% like in China. And in Africa, you don't have room for this kind of policy. And what kind of fiscal austerity you said you would propose for Africa if you're proposing this kind of policy. I think the relationship here is different. If you're underprice with exchange rate by accumulating reserves, you are pushing your savings rate up. And you're pushing your savings rate up by a policy of underpricing your exchange rate and accumulating reserves. China had a positive current account and a positive capital account. And it was a choice. China could have allowed the exchange rate to appreciate. But instead of doing that, China was putting all the surpluses into reserves. And this is the industrial policy which favors the tradeable sector at the expense of the non-tradeable sector. And this is a policy that pushes up savings rate and investment rate. And this is exactly the reason why China has a savings rate of 60%. Because when Mao Zedong died in 1976, China had an investment rate of about 25% and the same savings rate. And then it went up to 50%, right? So this is known as a capital flowing uphill. Countries that became economic miracle were exactly the countries from which capital was flowing uphill to the northern countries. It's a price to pay for this kind of policy. And there are no economic miracles which are based on capital flowing downhill. Thank you. Thank you very much. I'm going to give our presenters an opportunity to react. I think I'm going to start with last, Steve. Wanted to react to that China question. I guess I don't. You know, the reserves outcome is a general equilibrium outcome. So if you're going to add a few points of GDP to your reserves every year, you got to run a current account that's consistent with that, right? So it means that spending in the economy has to be a couple points of GDP below what it would otherwise have been to sustain that. That's why I asked the question. What form of austerity do you propose to accommodate an equilibrium current account? I'm not disputing your point, the last point you made about the current account. But these are economies that are running massive current account deficits to finance by aid, finance by the sovereign bond offerings, and so on. So I just think you've redescribed the Chinese model without resolving the question, which is how are you going to run a depreciated real exchange rate over more than a very temporary period? And the answer is you need some instrument to cut aggregate spending in the economy relative to GDP. And that's painful. And the question is how you do it. So well, we're just restating our dispute. Okay, you either are going to, you got to get those reserves from somewhere. You got to accumulate them from somewhere. The algebra says you must run a current account surplus bigger than you otherwise would have done. It's not going to get it done to borrow those reserves. It's not going to depreciate the real exchange rate. So the real exchange rate is an endogenous variable. You can push it in the short run. You can set it in the short run, but you certainly can't set it over longer periods unless you change the real equilibrium of the economy. So do you want me to now pass to the others or tourists? Yeah, I think of the reflection that many of these questions are kind of centered on is that if you don't diversify your economy sufficiently in the good times, then you're in a very bad space in the bad times. And countries such as Nigeria, even some of the lauded success stories like Brazil and so forth are now entered that bad space. So in some ways, 30 years ago, we were talking about, you know, the need for a structuralist approach to macroeconomics so that you thought more about the supply side of countries and their ability to respond to macro signals. And part of that is developing yourself beyond the export of unprocessed primary commodities. So in some ways, the difficulties that we're going to see in the next three, four, five years, you know, particularly around debt service and so on, are going to bring that lesson home again. Now we can disagree about how we achieve that diversification. Other sessions in this conference will be talking about it. But on top of that, I think one thing that policymakers need to think about, and this kind of goes to the question about unbalanced growth, is to really kind of think about constructing some scenarios for themselves. You can never have perfect information, particularly in macro policy, but you can start to think through bigger scenarios. For example, what is going to be the demographic side of your economy? How is that going to impact your macroeconomic balances? How is it going to raise public spending? How is it going to change your export potential, growth potential? Do we have economic consequences, growth consequences? How is climate change going to affect you? That's going to be a big issue. On the macroeconomic side over the next 30, 40, 50 years, because some countries, if they go underwater, they'll also see their revenues underwater. So I get a fiscal problem. So, you know, there are big issues that go beyond pure macroeconomic policy towards the construction, really, of macroeconomic scenarios under conditions of uncertainty. So I think that's what I take from this discussion here. Thank you, Governor. Just focus on the areas that are relevant to this presentation. I guess the nice thing about being given one minute and lots of questions is you can choose which ones you want to answer. I want to deal with two of these, fixed or floating. It's a big choice that emerging markets have, that developing countries have. I don't think there's a right or wrong. I don't think there's a right answer or a wrong answer, but I do think that this is not a black or white issue. We have had countries with fixed exchange rate regimes, such as China, that have done incredibly well. And we know that many fixed exchange rate regimes in Asia during the Asian crisis or in Latin America did not work. When the US dollar appreciated, as it's appreciating now, Argentinian exports, for example, became incredibly uncomparative and Argentina suffered an economic shock. The second point, so not everybody can run a fixed exchange rate. The second point is I agree with Steve in the sense in just from a maths, the algebra point of view, if you're going to be running large, if you're going to be running a chronically undervalued exchange rate, you have to continuously accumulate foreign exchange reserves. You can only do that if you're running a savings surplus. Now, if China has got a 50% savings rate and it chooses to invest at the rate of 45% of GDP, that is monumental, that is large. It's still running a savings surplus. My country has got a 15% savings rate. If we have to invest a 10% of GDP to run a savings surplus, we would be much poorer because 10% investment rate is just too low for us. And so we in some ways don't have a choice. I would love to be a central bank governor of a country with a 50% savings rate. My problems are different, but I'm not. But the second problem is you have to make sure that you have a really effective exchange rate depreciation. In other words, you have to suppress wage increases when your exchange rate depreciates. We don't have the political tools to suppress wage increases when our exchange rate depreciates. China might. They might have the political tools to suppress wage increases. We don't. And so that's the second factor. We've got a strong trade union movement with a lot of indexation. And frankly, I'd rather live in that country than China. I don't have that choice. So from a central bank governor's perspective, it's nice to have a 50% savings rate, but we don't have the political economy tools to be able to manipulate both domestic savings and wages in the way in which non-democracies can. So in some ways, it's not a choice. The second issue is how do you deal with the political economy of fiscal policy? Now, I worked for a finance minister. It was a finance minister for a long time, 13 years. And every few years, him and I would have this debate, but should we introduce fiscal rules? Allah Chile, for example, should we have a fiscal rule? And his view was that we respect monetary policy independence. We give the central bank the independence to set monetary policy. Fiscal policy is a political choice that should be made by a democratically elected government. And if they stuff it up, then the electorate should vote them out. And my view changed over the period, but the opposite view of this was that, yes, but politicians always want to spend the commodity boom today. They never want to save enough for a rainy day. And fiscal rules may force them to save. So it's a difficult question. I don't know the answer. I think that they're disadvantages of hamstringing governments by fiscal rules because I do think you weaken democracy. You weaken the electorate's ability to choose who and what policy regime they want to be, which I think is an important element of open societies and economic development. But I do think that you do need some aspect of counter-cyclical fiscal policy. So when commodity prices are high, you save a lot. One small anecdote. The toughest budget I ever had to present to cabinet was in late 2006, early 2007, we took a budget to cabinet that suggested we run a budget surplus of 4% of GDP. And cabinet ministers from the president down said, are you absolutely effing mad? You want to run a budget surplus in a country with 40% poverty rates. Are you mad? And I said, yes, but this commodity boom is going to end. The revenues that we're earning from the commodity boom will end. If you spend this on teacher salaries or health care when the commodity boom ends, what are you going to do? And they said, okay, let's spend some of the money on infrastructure and let's spend some of the money on education and we'll save some of the money. So I said, if you spend it, it's not a surplus anymore. And cabinet whittled down that budget surplus from 4% to 1% and four months later, five months later, the world economy crashed and commodity prices crashed. We ran a 7% budget deficit that year. And so these things are never easy, even with fairly sound governance in place. They're coming to a close. Sorry, getting pretty exciting. Steve, do you want to say any residuals? As a word, I'm going to end. I'll take one so we can stop on a positive note here. So Alan, I'll just maybe take up Alan's point. Really good point about, I guess, 95. By the way, President Quiquete was the finance minister who in 1995 presided over the fiscal consolidation in Tanzania. That's a real litmus test of the change of leadership and how in some sense the fundamentals are aligned around sensible economic policy across the continent more than in the past. But let me just make a simple point, which is that you've heard now in many forums here at this conference about the lack of structural transformation in Sub-Saharan Africa about the problem of diversification of the economy. And now from Alan, the question of whether the growth that's happened since the mid-90s really might be driven off the back of commodity prices and not much else there. Suppose you accept all that narrative. It then follows that the end of the commodity supercycle is a major opportunity for the continent to pick up on the agenda that the commodity boom not sideways, which is to structurally transform the economy to diversify exports. You're going to get a weak real exchange rate out of this. This is an equilibrium real depreciation that you've been handed with all of the fiscal challenges and the great difficulties, but it underscores that this is the real size, not monetary policy that's going to change that narrative. Now's the opportunity to take that real depreciation and start promoting non-traditional exports, do the fiscal work, the regulatory work, the business environment work. Thanks. Thank you very much. By the way, show of hands for.