Some Research and Policy Issues for Africa’s Sustainable Development

More than a decade and a half since the beginning of the “adjustment era,” economic development still lags in Sub-Saharan Africa. Avoiding major policy reversals, let alone deepening the reform process, is still a major concern. Therefore, the critical need for a coherent strategy for sustainable development cannot be overemphasized. This note stops well short of proposing such a strategy and, instead, explores some elements of such a strategy, starting with lessons from Sub-Saharan Africa’s adjustment experience.Most observers would agree that the response of private investment to economic reforms has been modest, that sustainable growth has yet to materialize; that macroeconomic stability remains fragile and dependent on foreign aid, that vulnerability to external indebtedness and external price shocks remains high; and that reform has brought little improvement in human welfare (see, for example, Ndulu and others 996). A strategy for sustainable development for Sub-Saharan Africa should therefore recognize at least four issues.First, that development requires the presence of developmental states in Sub-Saharan Africa that are both capable of and willing to manage the complex process of economic transformation. Second, that stabilization by itself is not likely to trigger a virtuous circle from stabilization to growth to still greater stability, because of a market coordination failure requiring external intervention (substantial external debt relief may be required as a prelude to reforming the current modalities for aid and policy conditionality).Third, given the severity of the poverty problem in Sub-Saharan Africa, aggressive measures may be required, in the context of a model of distribution and growth that also takes into consideration state capacity and fiscal implications. Fourth, as a direct result of inadequate fiscal adjustment, global financial market integration, and current (International MonetaryFund) and potential (WorldTrade Organization) external conditionality, Sub-Saharan Africa is fast losing its macroeconomic competitiveness.To the extent that real exchange rate competitiveness is the main instrument for export-orientation and economic diversification at this stage of Africa’s development, macroeconomic policy and macroeconomic institutions in Sub-Saharan Africa should be shaped by the requirements for achieving theses objectives.