This will be my last post on Africa Can. Having recently started a new adventure as Chief Economist of the World Bank’s Middle East and North Africa (MENA) region, I will be blogging on that region’s issues in the MENA blog as well as starting a more general blog (tentatively titled “Economics to end poverty”) with some of my fellow bloggers. It has been a privilege to moderate Africa Can, and I want to thank our readers for the stimulating, lively and frank discussions, as well as for having made this the most popular blog at the Bank.
Public Sector and Governance
Co-authored with Luc Christiaensen and Aly Sanoh
For a decade and a half now, Africa has been growing robustly, and the region’s economic prospects remain good. In per capita terms, GDP has expanded at 2.4 percent per year, good for an average increase in GDP per capita of 50 percent since 1996.
But the averages also hide a substantial degree of variation. For example, GDP per capita in resource-rich countries grew 2.2 times faster during 1996-2011 than in resource-poor countries (Figure 1). Though not the only factor explaining improved performance—fast growth has also been recorded in a number of resource-poor countries such as Rwanda, Ethiopia and Mozambique (before its resource discoveries)—buoyant commodity prices and the expansion of mineral resource exploitation have undoubtedly played an important role in spurring growth in several of Africa’s countries. Even more, with only an expected 4 or 5 countries on the African continent without mineral exploitation by 2020, they will continue to do so in the future. Yet, despite the better growth performance, poverty declined substantially less in resource-rich countries.
If user fees for health have been so vilified (including in comments on this blog), why are we bringing the subject up again? Because new evidence calls into question the prevailing view, namely that removing user fees leads to: (i) increased use of health services and hence to (ii) improved health outcomes. Confirming (i), the recent literature shows that (ii) does not always follow.
Raising the price of a good or service has two effects: it reduces demand and increases supply. In the case of user fees for health, it was thought that paying for a service also makes people use it more appropriately (you don’t go to the doctor for minor ailments) and value it more than if they obtained it for free.
Speaking about the often unruly behavior of his talented young players, Arsene Wenger, the famous Arsenal coach, said: "Some are wrong because they are not strong enough to fight temptation and some are wrong because they don't know."
“So how are you enjoying living in paradise?” Michael Geerts, the former German ambassador to Kenya asked me the other day. He was posted in Nairobi during the difficult years in the end of the 1990s, and continues to stay in touch with a country he loves dearly. Many colleagues, who once worked in Kenya have bought houses in Nairobi, and plan to retire in the “city under the sun”. But not everybody shares their passion and faith in the country’s future. There are many pessimists who feel that the country is moving in the wrong direction. Kenya, they say, will never rid itself from grand corruption, and crime such as drug trafficking will continue to flourish.
Are they seeing the same country? Maybe both perspectives are right, because Kenya is a country of extremes.
“Uganda might lose the market in South Sudan, if deliberate efforts aren’t put in place to sustain it”, said Uganda Investment Authority Chairman, Patrick Bitature during a hard-talk discussion at the February 14th launch of the Uganda Economic Update – Bridges across Borders: Unleashing Uganda’s Regional Trade Potential.
Bitature argued that Uganda’s supplying of South Sudan was more circumstantial than strategic.
“Food items like rice, matooke [green bananas], maize and sorghum that Uganda is exporting to South Sudan will soon be grown there, once stability returns. Uganda instead needs to add value to these exports”, he said.
The data are un-ambiguous: Kenya’s economy is starting to catch up with the rest of the world. But many of you probably wonder if that is really true, especially when observing the streets of Nairobi or the daily life in rural areas. In other words, is economic catch-up translating into social progress? Will today’s children live a better life than their parents? Will everyone enjoy decent social and infrastructure services in the new Kenya? Let’s zoom in on the case of health.
How healthy is Kenya today? Simply said, it could do better. This is important from an economic standpoint, because a population’s health is a key foundation for development. Healthy populations are more productive; they also save and invest more. On average and all other things equal, one extra year of life-expectancy is associated with an increase in a country’s GDP by 4 percent.
Let's think together: Every Sunday the World Bank in Tanzania in collaboration with The Citizen wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a few questions.
The overall tax burden in a country is largely determined by the role that citizens expect the State to play in the economy. People are paying more taxes in France than in the US, not because the French are richer but because they expect more public services from their government. For this reason, no single 'optimal' tax burden can be applied uniformly.Tanzania’s tax revenues by the central government were equivalent to 15.7 per cent of GDP in 2011/12. This was higher than Uganda (12 per cent) but lower than Zambia (16.5 per cent) and Kenya (19.5 per cent).
Africa’s emergence is the new consensus. For the second time in a just few months, a major international journal has run a cover illustrating newfound optimism about the continent. After The Economist’s mea culpa (correcting its previous assessment of a “hopeless continent”), TIME magazine just re-ran an earlier title: “Africa rising”.
This is no fluke: Africa’s economies are growing and the continent is much wealthier today than it ever was – even though, collectively, it remains the poorest on the planet. Many African nations (22 to be precise) have already reached Middle Income Country (so called “MIC”) status and more will do so by 2025. Today, Africa includes a diverse “mix” of countries, ranging from the poorest in the world to the fastest growing; from war-torn countries to vibrant democracies; from oil-rich economies to ICT champions, and the list goes on.
IMF Chief Economist Olivier Blanchard created quite a stir at the recent American Economics Association Meetings when he presented his joint paper with Daniel Leigh that showed that, for 26 European countries, the fiscal multipliers—the amount by which output expands with an increase in the fiscal deficit—were considerably higher than previously thought. Whereas these multipliers were previously thought to be around 0.5, they find them to be above 1.0. Applying these figures to a reduction in the fiscal deficit (sometimes called “fiscal consolidation”), Olivier and Daniel suggest that people may have underestimated the extent to which European economies would contract in the wake of their fiscal consolidation.