Summary
- Building resilience requires capable and autonomous monetary and fiscal institutions and effective governance. This paper explores how 12 African countries have pursued this goal over a 20-year period following exposure to several exogenous and endogenous shocks.
- Pegged exchange rate regimes appear to constrain structural growth prospects, while tightly managed regimes appear to exacerbate volatility. Freer-floating national currencies within the limits of a global reference and other regional/continental currencies will enable progressive movement towards a customs and monetary union. Greater dependence on intra-regional trade, and its corollary in product and source/destination diversification, can smooth vulnerability in the face of exogenous and endogenous shocks.
- Short- and long-term resilience can be developed through the consistent use of countercyclical monetary and fiscal policy instruments, especially during inflation troughs and production peaks, even if financial and fiscal capacity is insufficient to avoid procyclical outcomes. Monetary and fiscal rules can be designed to track and moderate the speed of money supply growth, reserve accumulation, debt restructuring, revenue generation and spending prioritisation.
- In pursuit of inclusive growth and the effective use of human capital potential, infrastructure (especially employment-intensive public works and maintenance) and social spending on the UN’s Sustainable Development Goals 1–4 (through welfare grants, primary healthcare and education) can be protected through even closer stabilisation measures. Additional and redistributive revenue generation would focus on corporate, personal income and property taxes and the differentiation of sales tax on a basic-needs-to-luxury/sin continuum.
- The speed and effectiveness of countercyclical and inclusive policy interventions depend on the availability of real-time data and justifiable projections. The availability of especially fiscal data in most African countries is too limited to enable statistically significant results that can illuminate the nature of the more ambiguous relationships between components of macroeconomic resilience and socio-economic growth.
