The Monterrey Consensus: Progress, Challenges and Way Forward

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The Monterrey Consensus Progress, Challenges and
Way Forward

• Patrick N. Osakwe
• Trade, Finance and Economic Development Division

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I. Background

• The most important challenge facing Africa is how
  to achieve sustained economic growth and
  eradicate poverty
• The 2007 MDG Report indicates that Africa is the
  only region at risk of not meeting any of the
  MDGs.
• Mobilization of finance is crucial to reversing
  the current trend and increasing the likelihood
  of African countries meeting the MDGs by the
  target date.
• World leaders recognized the importance of
  finance in meeting the MDGs when they adopted the
  Monterrey Consensus in 2002

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• The Monterrey Consensus has now emerged as the
  key framework for development finance. It has six
  core areas
• Mobilizing domestic financial resources for
  development
• Mobilizing international resources for
  development
• Promoting international trade as an engine of
  development
• Increasing international financial and technical
  cooperation for development
• External debt
• Systemic issues

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II. Tracking Performance and Progress

• A key question that the international community
  has to answer is to what extent have the
  objectives of the Monterrey Consensus been
  achieved in the six core areas?
• This presentation provides answers to this
  question using two methods
• Published macroeconomic data
• ECA survey of African policymakers

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Evidence from Macroeconomic Data(annual average)
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ECA Survey of Policymakers Key Messages

• Overall, very limited progress has been made in
  realizing the objectives of the Monterrey
  Consensus in the Africa region
• Significant progress has been made in the area of
  external debt relief.
• But performance in the areas of international
  trade as well as external and domestic resource
  mobilization has been either fair or disappointing

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Area of least progress in the Monterrey
Consensus( of respondents)
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• FDI inflows have increased in recent years, but
  they are still insufficient and too concentrated
  in the natural resources sector
• African governments have made efforts to mobilize
  domestic savings, but savings ratio remain low
  relative to investment requirements
• 41 percent of respondents rated as good the
  performance of domestic governments in mobilizing
  savings
• 28 percent rated it as fair
• 25 percent rated it as poor.

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Obstacles to the mobilization of domestic
resources
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• ODA flows to Africa have increased since the
  adoption of the Monterrey Consensus.
• But donors are still not on track to meet their
  commitments and recent aid flows tend to be
  concentrated in a few countries and social
  sectors
• Although exports have increased in recent years,
  respondents believe that donors have not made
  much progress in supporting African countries in
  the area of trade
• The main barriers to export promotion in the
  region are market access and supply constraints

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Barriers to export promotion and development
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• On systemic issues, the international community
  has not done enough to increase Africas voice in
  the governance of international monetary,
  financial and trading systems.
• 56 percent of respondents disagreed with the
  notion that the current governance structures
  allow for effective participation of African
  countries in the global economy.
• In the area of external debt, majority of the
  respondents (over 70 percent) agree that there
  has been significant progress in reducing the
  external debt of African countries.
• However, 65 percent of the respondents do not
  believe that recent debt relief initiatives will
  lead to a resolution of the debt problem in
  Africa.

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Source of external debt problem in African
countries
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III. The Way Forward

• Evidence from both macroeconomic data and ECA
  survey of African policymakers suggest that very
  limited progress has been made in achieving the
  goals of the Monterrey Consensus
• Considerable efforts are required by both African
  governments and development partners to mobilize
  the resources needed for development in the region

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Domestic and International Resource Mobilization

• African countries need to take concrete actions
  to boost savings by exploiting the potential of
  micro-finance institutions, promoting regional
  integration of capital markets, and aligning
  trade reforms with fiscal policy responses.
• They also need to improve the investment
  environment, develop financial infrastructure,
  and reduce transaction costs of remitting money
  from abroad.
• They should be selective in their choice of FDI
  flows with preference for sectors with high-value
  added.

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International Trade

• African countries have to move into the export of
  new and dynamic products in world trade if they
  are to increase the regions share in global
  exports.
• Diversification of the production and export
  structure is necessary to achieve this objective.
• Development partners should create a trading
  environment that allows the region to unlock its
  export potential.

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Official Development Assistance

• Africas development partners must scale up
  efforts to meet their pledges on aid quantity and
  quality.
• They should also live up to their promise to
  untie aid flows and make them more predictable.
• There is also the need for better allocation of
  aid across countries and sectors to maximize
  impact

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External Debt and Systemic Issues

• Despite progress in debt relief, there is the
  need to extend eligibility for current debt
  relief programmes to non-HIPC African countries.
• African countries should also put in place a
  mechanism to ensure that loans from new creditors
  do not lead to a new cycle of indebtedness.
• The international community should begin to take
  more seriously the issue of increasing the voice
  of African countries in decision making bodies of
  international institutions.

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THANK YOU