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Inclusion, governance, fiscal space can help overcome fragility, says IMF.

An approach focusing on inclusive politics, effective governance, and fiscal health seems to offer a viable route to overcome fragility in Sub Saharan Africa, an IMF staff report said.

Still, given the multiple sources of fragility and the reinforcing interactions among them, fragile countries find it very difficult to build resilience, the study added.

The report, "Building Resilience in Sub Saharan Africa's Fragile States," was released 1 July at the Center for Strategic and International Studies in Washington, D.C. The report highlights the persistence of fragility and documents progress across countries since the 1990s, including through detailed analysis of seven country case studies.

"One key message from this work is that countries need to reach a sufficient level of political consensus on the way forward to drive economic and other reforms that, over time, strengthen institutions and set the basis for economic growth" said David Robinson, Deputy Director of the IMF's African Department.

"Since there is no single or common cause of fragility, in light of the variety of individual country circumstances, there can be no single template for building resilience," said lead author Enrique Gelbard. "Still, some steps that are part of a long-term vision-because resilience takes a long time to achieve-and with adequate tailoring to the specifics of each situation, are usually necessary to build resilience."

Such steps should aim at fostering security and inclusive politics as well as implementing selected and well sequenced legal, governance, and economic reforms; and building domestic capacity.

State fragility

Fragile states-states in which the government is unable to deliver basic services and security to the population-face severe and entrenched obstacles to economic and human development. While definitions of fragility and country circumstances differ, fragile states generally have a combination of weak and non-inclusive institutions, poor governance, low capacity, and constraints in pursuing a common national interest. Crises in such countries can also have significant adverse spillovers on other countries.

Initially, fragility was mainly seen as proclivity to or a legacy of internal conflict, the report said. However, more recent approaches highlight other aspects of fragility that are not directly related to, or even associated with, violence, and can be retraced to the weakness and lack of legitimacy of government institutions, a poor and unstable economic environment, and a divisive political context.

The focus has therefore shifted from the causes of conflict to the multiple dimensions of fragility-where conflict is a possible outcome with feedback loops into other aspects of fragility-and to how weaknesses along these dimensions interact and reinforce one another in a vicious circle. This approach starts from the recognition that countries that are considered fragile suffer from significant limitations in not just one, but several areas owing to weak state capacity.

Ability to respond

Assessing developments in 26 Sub Saharan African countries, the report documents progress in 11 countries but also notes that several countries remained fragile and some have even regressed.

Since each country's experience is different, a buildup of resilience can be thought of as a transition from weak governance and institutions-in the extreme involving complete state failure and conflict-to a situation in which countries can deliver public services to their citizens against a backdrop of peace and stability.

Fiscal space-stronger government financial positions, favorable debt dynamics, higher revenue-raising capacity, and expenditure flexibility-is critical in fragile states as it provides room to meet pressing development needs, as well as the ability to respond to adverse shocks by running expansionary fiscal policies and therefore smoothing or cushioning the impact of shocks on the population.

Available data do suggest that, among the countries that were deemed fragile in the 1990s, those that have become "resilient" have generally managed to build stronger fiscal institutions and to widen their fiscal space.

Buildup of resilience

The experience of fragile Sub Saharan African countries suggests that there are three key factors that determine the success of countries in building resilience, the report said.

* A sufficiently inclusive political arrangement that helps sustain peace and fosters the development of a national vision going forward;

* A committed leadership that is both willing and capable of promoting policies that translate this vision into action and implement reforms that improve governance, transparency, and accountability; and

* Strong international support in the form of financial and technical assistance focused on security and on development. International stakeholders need to engage with fragile countries on a long-term basis, providing assistance in ways that can improve the effectiveness of the state, coordinating their efforts closely, and focusing capacity development efforts on economic institutions.

In particular, the study notes that policies that maintain economic stability, mobilize revenue, and make room for investment are critical to build resilience. Furthermore, the study highlights the primary role of fiscal policy and institutions, lower government spending on defense, and higher infrastructure spending as factors behind the buildup of resilience in selected countries in sub-Saharan Africa.

The importance of capacity building and economic policies in fragile states is good news: whereas broad-based institutions are deeply rooted in history and highly persistent, basic economic and fiscal institutions can be bolstered over a relatively shorter period and help build resilience.

The report covers the period 1990-2013. The case study countries are Central African Republic, Democratic Republic of Congo, Ethiopia, Mali, Mozambique, Rwanda, and Sierra Leone. The report adds that Cameroon, Ethiopia, Mozambique, Niger, Nigeria, Rwanda, and Uganda made substantial progress in building resilience; it cites Cote d'Ivoire, Malawi, and Zimbabwe as countries that had regressed.

"Building Resilience in Sub Saharan Africa's Fragile States" was written by an IMF staff team led by Enrique Gelbard, with Corinne Delechat, Ulrich Jacoby, Marco Pani, Mumtaz Hussain, Gustavo Ramirez, Rui Xu, Ejona Fuli, and Dafina Mulaj.

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Publication:CPI Financial
Geographic Code:60SUB
Date:Jul 5, 2015
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