AFRICA'S DEVELOPMENT PROSPECTS AND THE ROLE OF THE AFRICAN DEVELOPMENT BANK

ECONOMIC PERFORMANCE AND PROSPECTS

Against the backdrop of the global financial crisis, the rate of GDP growth in Africa in 1998 is estimated to have grown by 3.2 per cent, compared to an average of 1.6 per cent for the period 1990-1994 and the recent peak of 5.5 per cent in 1996. Although real output growth in 1998 barely kept pace with that of population, it is encouraging that the positive growth in per capita income established since the mid-1990s continued. Nonetheless, the increase in per capita income growth achieved in recent years remains insufficient to recoup the substantial income losses of the last two decades. Africa therefore is entering the new millennium with about 40 per cent of the continent's population suffering from absolute poverty. Poverty reduction is, thus, the main challenge facing the continent and the main objective of the African Development Bank Group and its development partners.

Accelerated growth is the first line of attack in the fight against poverty and Africa would have to achieve a sustained rate of economic growth well above twice that of population in order to arrest and reverse the spread of poverty. The policies and strategies that promote broad-based growth and poverty reduction include, first, deepening economic reforms and promoting the development of the private sector so as to strengthen the sustainability of investment. Second, building human capital

through efficient delivery of social services, principally health, education and nutrition. Third, promoting regional integration, which provides opportunities to pool resources for investment and enhance the efficiency of production by arkets make possible. Fourth, addressing the long-term foundations of development, notably gender mainstreaming, environment care and the pursuit of good governance.

MOBILIZING RESOURCES FOR INVESTMENT

Total investment as a proportion of GDP fell from 25 per cent in the mid-1970s to some 20 per cent in the early 1990s, with private investment accounting for about 12 per cent. In low-income countries, the investment rate stands at some 17 per cent, with the share of private capital accounting for less than 10 per cent. Clearly, such investment rates are incompatible with the quest for accelerated and sustained growth. The more so because the recent economic recovery in Africa is mainly due to reform payoffs and improved utilization of the existing stock of capital. Hence, sustaining and improving growth in the times ahead significantly depends on the extent to which the magnitude and productivity of investment are increased. Enhancing growth prospects by increasing investment requires, obviously, mobilizing resources from domestic savings, external private investments and official external flows.

With respect to domestic resource mobilization, it is worth noting thameasures that are being taken include improving banking infrastructures, developing non-bank financial instruments and supporting micro-finance. However, given the low income levels, there is a limit to which domestic resource mobilization can generate sufficient resources to finance investments needed for sustained growth. t many African countries have undertaken financial reforms to enhance savings through liberalizing interest rates, eliminating credit controls, and reducing directed credit programs.