With commodity prices on a structural, long-lasting decline, prompt fiscal adjustment is needed to safeguard macroeconomic stabi- lity and rebuild policy buffers across the region, especially in oil-exporting countries, International Monetary Fund (IMF) MD Christine Lagarde said last week.

Following the recent African Consultative Group meeting, in Washington DC, she said country authorities should protect priority expenditures, including social and efficient infrastructure spending, to ensure that longer-term development goals remain achievable.

This emerged as Africa’s growth was hampered by an increasingly difficult external economic environment and tighter financial conditions, exacerbated by noneconomic shocks such as weather- and security-related challenges.

“Beyond immediate policy reactions, we agreed on the need to reinvigorate the economic diversification agenda. Stepped-up structural reforms to improve the business environment, as well as labour and financial markets and opening to trade, are critical for boosting economic prospects, creating jobs and improving living standards,” Lagarde added.

Further, she suggested that, where feasible, the exchange rate should be allowed to adjust as needed to absorb shocks and improve competitiveness, with central banks’ interventions limited to mitigating disorderly market movements.

“It is indispensable for African countries to adapt policies to the new environment and use all tools at their disposal – fiscal, monetary, exchange rate and structural policies – to preserve hard-won macroeconomic stability, contain social impact, further strengthen economies’ resilience to shocks and support growth,” African Caucus chairperson and co-chairperson of the African Consultative Group meeting Abdoulaye Bio-Tchané commented.

“Going forward . . . it will be important for governments to maintain macroeconomic stability, strengthen institutions and the business environment, address critical infrastructure gaps, expand access to financial services in our economies and seek to ensure that growth is both broad-based and inclusive,” he said, concluding that appropriate policies would be key to weathering this difficult time and maintaining a strong foundation for sustainable growth and poverty reduction.