 Good morning, good afternoon. I am replacing Chris Adam. He looks very similar to me. Chris and I have worked together for a long, long time, so I'm happy to do that. But it is his presentation. So I'm going to talk about the rest of Sub-Saharan Africa, so not South Africa, and I'll tilt towards monetary policy very heavily. And therefore, we're talking about independent currencies, countries with independent national currencies. So I don't mean the random monetary area or the CFA countries, but all the other countries. And so just quickly, Chris starts out with a kind of tour starting in the mid-1980s of really epical changes in how monetary policy is done in Sub-Saharan Africa. He then goes on to talk about a period now starting, let's say, in the early to mid-1990s, a longish period now, of reforms, favorable tailwinds. I'll say what he means by that. And then emergence of what a new consensus assignment, talking now about the relative responsibilities of monetary and fiscal policy, essentially. And then he looks forward to some contemporary challenges. So just passing through here, wider is 1985, I guess. That's Tanzania in the red GDP as a proportion of the US GDP per capita. And Sub-Saharan Africa on average, Sub-Saharan Africa, I guess it must be, in the blue. So Chris's story starts at the end of a period already, a very slow growth. And then the story we're going to tell about internal reforms really starting in the late 1980s and I think in spirit, more or less concluded by about the mid-1990s, so that the direction of travel was absolutely clear in most of Africa by the mid-90s. And then you see the period, the longish period since then, of relative to the US economy, really much more favorable performance. I think the macro side has something to do with that for sure, but I very much subscribe to the view of necessary but not sufficient condition, but clearly necessary. It was part of the syndrome of decline, I think, continent-wide through the 70s and 80s. So let me go first to the 1980s and just remind you of what macroeconomic policy looked like, a combination of exchange control regimes, so fixed exchange rate regimes dating from independence in the 60s, that had induced by the time of the oil shocks in the 70s and the tropical beverage shocks of the 70s had induced really tight rationing. In other words, the exchange rates were overvalued and you had increasing black markets and foreign exchange. Directed credit and interest rate controls, really classic financial repression throughout most of the continent. And oligopolistic banking, that's what I say here, really mainly nationally owned dominant banks with a few other players in most cases. And then at the bottom, really, fiscal dominance looming large. And as Chris puts it, no effective nominal anchors in the system. So let me back up. I'm going to put a little of my own framing on here just for a moment and think for a minute about monetary policy and what its responsibilities are and think from a kind of conventional advanced country perspective. Nominal anchor of some sort would be job number one. Regulate the financial sector would be job number two. And no central bank can duck those two jobs in some form. Job number three might be macroeconomic stabilization. You might have an activist central bank with an actual monetary policy. And that's where you would end there in describing a typical industrial country central bank. Now put that central bank into a development context. What would you add? Well, the very first thing you would add is some role in financing the government. At least that would be your temptation. That would be your first thought. And so much of the story in sub-Saharan Africa from the point of establishment of the central banks out through the late 1980s was the dominance of that role of these central banks being played through the system, compromising their other functions in various ways. So that's why he says no effective nominal or fiscal anchors. The central banks being thrust into the position of financing the government. But just Ramon, what else would you then add on your short list if you were taking a development view of the central bank? Financial development, developing the financial system as a key growth contribution of this institution would be on your short list. That also got compromised by giving these central banks heavy, heavy fiscal roles, both direct roles in financing the government and then indirect what are really quasi-fiscal roles. That as soon as you start to ration foreign exchange, you have become a fiscal authority because you're handing out subsidies across the economy. As soon as you start to direct credit, you are a fiscal actor. You are handing out subsidies across the system. Joe Stiglitz added the last development role, which is really on the short list of central banks in Sub-Saharan Africa as a question mark, which is promoting exports. And I'll stop there. Those are the three things I would say that when you take a central bank and situate them in a low-income country, you'd like to add, you'd like to, couldn't you just use this institution to help finance the government? Couldn't you use them to help advance financial development and couldn't you use them to help promote exports? I'm gonna come back to the exports question. Okay, so let's go to a period that began in about the mid-80s and was fully integrated with structural adjustment reforms in the real economy were a set of reforms right in the domains of central banks and then towards the end of the structural adjustment era, which I'm thinking of as being concluded in practical terms around the mid-90s in much of Sub-Saharan Africa. Towards the end of that period, it involved a definitive attack on the relative roles of the fiscal and monetary authorities. So I'm not gonna maybe, well, I'll just dash through the reforms that were really key were first a dismantling of financial repression, so a liberalization of the banking sector, introduction of competition, removal of interest rate controls, late 80s, early 90s, and then, so that's exchange rate unification, so dismantling of exchange controls and then by the early 1990s, this attack on inflation, which fundamentally was a closing of fiscal deficits under IMF conditionality. So this was a period where I think there was actually quite a favorable fit between the IMF's sort of instinctive mindset at that period and the problem as it existed in much of Sub-Saharan Africa in terms of macro management, you needed to get the public sector deficit down to a level that could be financed at some reasonable rate of inflation without creating distortions all throughout the system and that got done, there's only a couple ways you can do that when you've got high-ish inflation and since fixed exchange rates were part of the problem, the solution was gonna be money-based stabilizations that shut down financing of the government and let the exchange rate go. So we are now in the working out of that era. In many, many countries, there was a serious and very searing period of fiscal consolidation and then a movement on to floating exchange rates within the background of this financial liberalization going on. The, Chris talks about the emergence in the background of these events in Sub-Saharan Africa of a new intellectual consensus about how macro policy ought to be done and the role of central banks. And I think I'm gonna probably not have time maybe to go through all these things. Let me just show you a few pictures to establish these points. So there's 1995, right in the middle there and you see the movement away in Sub-Saharan Africa away from exchange rate anchors, fixed exchange rates toward money-based regimes and then the emergence starting in with South Africa's adoption of inflation targeting of a few cases of formal inflation targeting or very close to it regimes. I talked about fiscal dominance and the end of fiscal dominance as being really the driving reality and the purple there is Nigeria's which tells the story the most dramatically but if you look at the other bars, you see fiscal deficits as a percentage of GDP really going down definitively starting in the second half of the 90s. Okay, and that period is still with us and right now is coming under tremendous pressure because of the fall of global commodity prices in many of these countries. Let's see. Okay, and then I won't show you the picture but in Sub-Saharan Africa significant liberalization of the capital account very kind of Washington Consensus kind of movement which I think also probably pushed these countries more towards the floating exchange rates that had happened during the 1990s so not complete liberalization except in some cases but substantial. Let me show you a picture that I like I've added to this one in this weird looking picture but the bottom line is there was a massive convergence in actual conduct of monetary policy throughout Sub-Saharan Africa and this is illustrated for the East African community here. What I've done is I've taken this price level of each country and just divided it by the Kenyan price level and index that thing, the log of that to zero and then just seen what those ratios did over three decades, the 1980s and then I rebased it again, the 1990s and I rebased them again and starting in 2000. And so you just see Uganda going off into the stratosphere during the 1980s and Rwanda Burundi actually having their prices rise less rapidly than Kenya's this massive spread and you see things converging already in the 1990s and now why are we talking about East African Monetary Union? Well, the bottom line is that the divergences in how in the conduct of monetary policy are really tiny now in the community. So this is really a major back story that you see throughout the continent. So what is this new consensus key to it? A clear assignment of responsibility between fiscal and monetary policies decline in fiscal dominance. A greater commitment to exchange rate flexibility to avoiding severe real exchange rate misalignments rather than exchange controls. And then more recently I talked about money-based stabilizations more recently a move away from the IMF Reserve Money Programming Framework towards really conventional operation of monetary policy through a short-term policy interest rate. So that move is underway in Uganda, Kenya, other places. And allied to it is an increase in the transparency of central banks in communicating their frameworks to the public. Let me show you that picture to give you a sense of it. So in the red here, African cases, this is looking at the index of transparency in 1998, so going to the right higher levels of transparency. You have the industrial countries up there towards the right corner. And then the index in 2010, the blue line is a 45 degree line. So there has been general movement in increased transparency reflecting the intellectual consensus in the literature and in practice and the African cases are very much on that overall trend. So major, major changes, really. Let's go to looking at contemporary challenges. So we're going through a period now starting in about 2009 of falling commodity prices affecting many of these countries and having a first order fiscal impact and an impact on the balance of payments, therefore pressures on the exchange rate. The key issue here, I think it was articulated by the earlier speaker. You've got a flexible exchange rate, the classic efficient macroeconomic response to a negative terms of trade shock is to allow the exchange rate to depreciate. And that is happening, no question, big time. At the same time, the central banks have chosen an inflation anchor rather than an exchange rate anchor but this exchange rate depreciation, if this adjustment is gonna occur through nominal depreciation, it is gonna feed right into your headline inflation and gonna face the central bank with a real question, do I push back against inflation? Do I allow the depreciation to take place but do I tighten policy so that it takes place through dampening domestic wages and prices rather than through letting the exchange rate go through the roof? And central banks are facing that issue right now and they're responding in a whole variety of ways, including reaching for some of the old instruments, capital controls and a lot of foreign exchange intervention and the question of whether these strategies are gonna be sustainable, whether in a context of having opened the capital account as you defend the exchange rate for a while and spend some reserves down in Nigeria, for example, whether you get into a very dangerous spot where capital movements are now gonna leverage up what's happening in the commodity markets so we are coming into a very, very much tougher and new environment. Mounting fiscal pressures I've talked about but let's talk for just a minute about the debt dynamics because part of the favorable tailwinds during the 90s were debt relief that really cleared the decks in terms of public sectors finances well in time for the global financial crisis which had a knock on effect in these countries, not so much through financial markets but directly on their exports and revenues and so countries were in a position to take a fairly activist fiscal response during the financial crisis and the IMF accommodated that largely. At the same time they had developed their domestic bond markets starting in the early 90s and they exploited those so countries and at the same time remember during the huge run up in oil prices following the Gulf War in 2003 there was tremendous prospecting in the energy sector throughout the continent and a lot of countries found major exploitable deposits and started to get the foreign direct inflows to exploit those. All this stuff is happening during the 2000s and very favorably essentially putting these countries into the position where they can rebuild some debt with some long run objectives in mind of developing the energy sector with some short run objectives in mind of propping up the economy during the global financial crisis but now that nice starting point that they had going into the financial crisis has been eroded by this buildup of debts and now the external, the sort of exogenous dynamics of debt have turned decisively against commodity exporters. Okay, so real interest rates are starting to rise, the sovereign spreads are rising they're around 7, 8, 9, 10 even maybe for Ghana's issue coming up. Big interest rates on sovereign borrowing and domestic bond rates are also rising and at the same time the growth rates because of the commodity shock are declining so that we really are in a classic test phase of this package. Exchange rate concerns, previous speaker talked about Helen Ray and the capital account, the problems of monetary policy under an open capital account. I think there's still enough lack of integration in especially among the lower income countries in Sub-Saharan Africa that even with an open capital account there's scope for the central bank to pursue domestic targets like the inflation rate at the same time as keeping an eye on the exchange rate but that is always a matter of degree and we are now coming into a situation I think where the limits on that maybe start to become apparent. I think I'll not talk so much about macro models. Let me finish by going back to the Stiglitz point because I think this is a really, really important issue. So Joe sort of suggested that central banks ought to be like China. They ought to have a mercantilist role. That is to say they ought to peg a weak exchange rate as a way of subsidizing, exporting activity and import substituting activity when you either lack the fiscal instruments to do it or you're under WTO rules and you have the instruments but you can't use them. So let's run a weak exchange rate and I think that you can't just say let's have a weak exchange rate and get that done. So somehow you have got to be like China. China's saving rate was 60%, okay? So they could run a weak real exchange rate by not spending anything and just piling up every year a balance of payments surplus that was the counterpart to this weak exchange rate. That's why I say mercantilist. And Joe's not in the audience but I would have asked him the question, what form of austerity do you suggest? That would be a little impish. What form of austerity do you suggest that we impose on the African consumer in order to run a weak exchange rate over more than the next six months? We can do it for six months if it's a temporary shock, no problem. Do that all the time. But a secular weak currency strategy, look, one of the key things we learned from the whole fight, okay, was that central banks have limited capability to do fiscal things. And so there's a real danger here of slipping the central bank back into a role that is a fiscal role. If you wanna subsidize exports, get rid of the constraints on exporting, work on that business environment, find ways to get around the WTO subsidies, don't allow a transitional real appreciation when you can avoid it. But running a chronically weak exchange rate, boy, that's a tough one. Maybe some of the audience can figure out how. Thanks very much.