Impact of Liberalization on Key Markets in Sub-Saharan Africa
Project / Programme Summary

1. Objectives
   
   The main objective of the project is to analyse the impact of the liberalization of the foreign exchange and other financial markets on broad based economic development of SSA countries. Specifically the project will analyse the impact of the liberalization of foreign markets; particularly the role of positive interest rates or the removal of financial repression on the mobilization of saving and efficient allocation of investment. The project also addresses the appropriate sequencing of financial sector reforms.
   
   The main conclusion of this project is that the liberalization of foreign exchange and financial markets have been implemented within the framework of the Washington Consensus; and has, so far, not provided a coherent linkage between the short term objective of stabilization (control of inflation) nor attained a balance of payments equilibrium and improvement in allocative efficiency and the long term objective of broad based poverty eradicating growth that will require not only macroeconomic stability in the form of moderate or low inflation and competitive real exchange rate, but the establishment of an institutional framework that will provide incentives for the development infrastructure capable of mobilizing domestic saving and intermediating loanable funds to profitable projects and capable entrepreneurs. This requires a proper understanding and promotion of complementarity of the state and the private sector. The bashing of the state that characterized the policy thrust of the Washington consensus underestimated the African realities and the experience of the development process in other parts of the world. Previous African states intervention in the economy such a maintaining overvalued exchange rate, discouraging private sector enterprise and limiting competition were wrong-headed. The role of the state has to be redefined taking into consideration the current initial condition and the capability of the real existing African state. Most producers in Africa are in rural areas and the urban informal sector. They have no access to credit and bank services. Current policies of financial liberalization have not improved their prospects of accessing of financial services. Policies of financial restraint and active promotion of the development of financial intermediaries is necessary for promoting broad based development.
2. Activities / contents
   
   The project benefits from the work of UNCTAD on the liberalization of financial markets in developing countries, and includes informal contacts and exchange of research papers with UNCTAD staff. The UN Economies Commission for Africa hosted the second project meeting in Addia Ababa where staff members from UNU Headquarters and UNCTAD participated.
   
   Two project meetings took place during the course of the project. The first in Kampala, Uganda and the second in March 1998 at the ECA in Addis Ababa. The papers are being revised by the authors following the project meeting in Addis Ababa in March 1998. They will be compiled and edited into the complete manuscript by October 1998. We have two overview papers, three thematic papers, nine country studies (Zimbabwe and South Africa have yet to present a second draft, and Côte d'Ivoire have just presented their first draft).
3. Expected outcomes / impacts
   
   Fits in line with section III -- Approaches on Regional Cooperation of the TICAD II Agenda for Action dealing with (ii) Regional Development.

Professor N.I. Lipumba
c/o UNU/WIDER
Helsinki