The World Bank has reaffirmed its gloomy view of the economies of the West African nations.
Only two countries, Cameroon by 26 per cent and Congo by 40 per cent were reported to have had their average per capita income increased.
Again only two countries Cameroon and Gabon managed to stay clear of the persistent and often widening trade deficits that afflicted all the countries in the region.
Nigeria's situation as the largest economy in West Africa indicates the gravity of the crisis but nowhere in the region has the crisis been more acute, indeed more chronic than in Ghana.
According to the report during fiscal year 1983, Western Africa continued to suffer from depressed markets for commodities, high interest rates, and stagnating levels of official development assistance.
While by no means the only cause of poor growth of the Western African economies, the worldwide recession, now in its fourth year, has been a dominant factor since 1979, in contrast with the 1960s and 1970s, when country structural problems and inadequate policies were the principal reasons why growth was slow in the region.
Estimates of cumulative growth of gross domestic product (GDP) over the three years, 1980-82, show that average per capita incomes have increased in two countries only: Came- roon (by 26 percent) and Congo (by 40 percent). In three countries (Ivory Coast), Togo, Sierra Leone), GDP grew at rates slightly less than the population. In nearly all the other eighteen. countries of the region including Nigeria (although growth there was very fast in the period 1974-79) - there was a net decline in overall per capita incomes.
There is no indication that there will be much relief to this bleak picture in 1983. If indications of economic re- covery in the major industrial countries are confirmed, the impact on African exports is unlikely to be felt before 1984 even though some commodity prices (coffee, cocoa) began a modest recovery during the first half of 1983.
Because of the sharp decrease in foreign-exchange earnings, countries of the region have experienced persistent and often widening trade deficits on current account with Cameroon and Gabon the only notable exceptions.
As a proportion of gross national product (GNP), current-account deficits for most countries now exceed 10 percent; in some cases, the deficit is several times that level. External reserves have fallen to their lowest level ever.
In two-thirds of the countries of the region, they amounted to less than one month's imports at the end of 1982. They are even negative for countries that make up the West Africa Monetary Union (UMOA) particularly Ivory Coast and Senegal - although foreign exchange for high-priority these two countries, as uses in in other members of the franc area, is ensured through the working of the "operations account" of the UMOA country central bank (BCEAO) with the French treasury.
In the industrial sector, the shortage of imported inputs - raw materials, spare parts, fuel - has led to widespread reduction in production. In many Western African countries, there is substantial unused capacity and a shortage of finished goods that had once been in ample supply.
The fiscal constraint has also become extremely severe - with the exception of Cameroon and Gabon. That constraint is manifested in several ways. Cuts in expenditure, first of all, have affected public-investment programs. It is probable that current investment levels allow for net capital formation in only a handful of the countries in the region.
It is also probable that in more than half of the countries, lack of main- tenance is resulting in a real erosion of capital stock. Thus, the continuing crisis is not only reducing the level of activity, it is also jeopardizing future growth.
Current public operations are similarly affected, albeit less drastically. Because both foreign exchange and domestic revenue are scarce, shortages of fuel and other imported inputs are widespread.
Insufficient local financing has slowed down the implementation of ongoing projects; and in perhaps a half dozen countries, delays of several weeks in meeting the payrolls of the civil service have become the rule rather than the exception.
One of the potentially most damaging effects of the crisis is that its persistence and severity make it difficult for governments to carry out structural- adjustment policies needed to foster long-term growth.
Subsidies
Restructuring investment programs that are out of phase with sectoral developments; reducing input subsidies, let alone increasing producer prices, in the face of falling export prices; re- moving food subsidies when consumer's real incomes are declining; recapitalizing public enterprises when public budgets cannot meet the wage bill; reducing government employment at a time of high urban unemployment - these are some of the challenges that governments in Senegal and Ivory Coast, Mali and Niger, Togo and Benin, Liberia and Guinea, and others face.
Against such odds, not surprisingly, progress over the last two or three years in implementing reforms has been uneven.
To make things worse, agricultural production in 1982 was severely affected by unusually poor rainfall in parts of the Sahel (Mali, Upper Volta) and in the coastal countries, particularly Guinea Benin, Ghana, Ivory Coast, and Togo.
The drought, in several countries, also led to severe crop losses through Mali fires. In Ivory Coast, drought and the harmattan combined to produce fire conditions considered to be the worst in living memory, with even the high forests burning out of control in some instances.
Ten percent of the stock planted in teak in a 1979 Bank-assisted project was totally destroyed. Fire also damaged Cocoa and coffee plantations in Ghana, Ivory Coast, and Togo.
Oil Exporters.
The situation in Nigeria - the largest economy in sub-Saharan Africa indicates the gravity of the crisis. Foreign-exchange earnings, virtually all from oil exports, have fallen dramatically since the end of 1981.
Foreign-exchange reserves declined in 1982 from a level equivalent to three months' worth of imports to less than three weeks' worth.
Investment, equal to about a third of GDP in 1980-81, has been radically reduced, as both foreign exchange and government resources contract (85 percent of government revenues, both federal and state, are directly generated from oil exports).
Imports in 1983 are likely to be seduced to about half their 1981 level. GDP that is not accounted for by oil declined about 4 percent in 1982, and was declining at an even higher rate in the first half of 1983.
This decline has also reduced incomes in Togo and Benin because of their dependence on exports to Nigeria, particularly of food and of commodities in transit. As early as April 1982, the government took a number of emergency measure involving import restrictions and fiscal contraction.
The measures have insufficient as the price of oil and the volume of oil exports continued their downward course to restore fiscal and external balance.
Medium-term and long-term in- debtedness, however, is low; the country, therefore, is likely to borrow heavily in 1983, possibly through some combination of medium-term refinancing from foreign banks of part of the arrears on trade payments, through borrowings from other countries that are members of the Organization of Petroleum Exporting Countries (OPEC), additional Eurodollar an through borrowing.
The downturn has brought investment programs in Nigeria's states to a virtual standstill. Since many projects involving IBRD assistance have shortages of counterpart funding, the pace of project implementation has slowed considerably.
The Bank is taking steps to speed up disbursements and to cover a greater proportion of project costs. In addition, a loan of about $250 million to finance the cost of fertilizer imports was at an advanced stage of preparation as fiscal 1983 ended.
By contrast, income in the Cango grew rapidly in 1982. In 1982, invest- ment expenditure was at a level six times higher than the average of the proven previous five years, a reflection of greatly increased petroleum exports and increased borrowing under a very ambitious five-year plan.
However, since the beginning of 1983, the government has undertaken to make deep cuts in the program as official re-estimates, made in early 1983, showed that oil revenues for the year may be 40 percent lower than had been originally forecast.
The region's newest oil exporter, Cameroon, continued to grow rapidly, with GDP probably increasing by more than 7 percent in 1982. Twenty-five years ago, Cameroon was a low-income country overwhelmingly dependent on coffee and cocoa as sources of foreign exchange earnings.
Now, with one of the highest in- comes in the region ($ 880 per capita in 1981), more diversified exports, and increased creditworthiness, Cameroon has graduated as a borrower from IDA to become eligible for IBRD borrowing. Cameroon's government perceives the medium-term problem as one of the opportunities and perils that accompany large oil exports.
The government has had a measure of success in avoiding the all-too-frequent consequences of a booming oil sector, which produces abundant foreign exchange and fiscal resources; atrophy of other commodity-producing activities, particularly agriculture, as good imports become easily available and agricultural exports less critical.
Three Restructuring Efforts
In Ivory Coast, structural-adjustment policies continued to be pursued with determination. The IBRD's first structural-adjustment loan (of $ 150 million) in support of the government's initiation of a stabilization plan was fully disbursed early in 1983.
As a result of the continuing adverse external environment, further declines in the country's terms of trade were registered; GDP declined in real terms by 1.8 percent in 1982. The government's response was to move swiftly to strengthen and intensify its structural adjustment program.
It adopted a bold and forceful package of policy reforms designed to promote growth, improve productivity, and generate public savings. Measures include reforms. in investment programming, in public enterprises, and in agricultural incentives.
New features of adjustment include a major restructuring of the system of industrial incentives and protection and reform of the costly public-housing scheme. In support of this program, a second IBRD loan (for $281 million) was negotiated at the end of the fiscal 1983.
The Togolese government, with support from the IMF, has designed a program that concentrates on reform of public enterprises, agricultural pricing, and macroeconomic management, with emphasis on reducing the govern- ment deficit. IDA has supported this program through a structural adjustment credit of $40 million.
In neighbouring Benin, the government introduced a new five-year plan and presented a package of policy reforms, notably in agriculture and the public-enterprise sector, at a Round Table meeting of aid donors and private investors organized jointly with the United Nations Development Programme in March 1983.
Adjusting to Reduced Prospects
Nowhere in the region has the crisis been more acute, or indeed more chronic, than in Ghana. For the past decade, exports, imports, investment, and production have all been in decline. In the period 1976-1982, Ghana's consumer price index increased by more than thirty-twofold.
In 1982, however, the new government took immediate measures to reduce expenditures and domestic credit so as to contain inflation and restore cocoa exports by rehabilitating roads and raising producer prices.
In 1983, several further basic adjustments were undertaken. They included a de facto devaluation of the cedi, rehabilitation and investment in agriculture, further budgetary austerity, and reduced growth of the money supply. To implement the program, Ghana sought the help of both bilateral and multilateral donors.
The IMF agreed to a stand-by agreement equivalent to 150 percent of Ghana's quota and a compensatory drawing to cover 1982's shortfall in exports. IDA provided a fast-disbursing import credit during the year and agreed to accelerate preparatory work on an export-rehabilitation credit in fiscal 1984.
The unexpected arrival in February 1983 of hundreds of thousands of Ghanaians from Nigeria put further pressure on Ghana's resources - particularly food supplies, which were already low as a result of a poor harvest in 1982.
The response of the aid community to this untimely event provided a measure of relief.
After years of destruction and economic deterioration wrought by civil conflict, Chad began reconstruction in fiscal 1983 with an acute shortage of spare parts, production inputs, machinery, equipment, and imported goods.
The Bank is working with the government and other donors in preparing a reconstruction program that could be supported with an IDA credit.
The three neighbouring countries of Guinea, Sierra Leone, and Liberia all suffered further decreases in their terms of trade in fiscal 1983 and recorded either stagnation or further declines in their per capita incomes. Through various policy changes, the governments of all three countries have attempted to adjust to their reduced prospects.
In Guinea, the government alleviated, to some extent, the extreme shortage of foreign exchange. by legalizing imports that are financed through the parallel market for foreign exchange. This measure followed that which legalized the private marketing of locally produced food at market-determined prices.
Agricultural exports at the official exchange rate, however, continue to be very limited - less than 5 percent of the level of two decades ago.
In Liberia, the government has successfully adopted a number of extremely difficult measures. Following the elimination, in fiscal 1982, of the consumer rice subsidy, public-sector salaries were reduced in January 1983 by between 16 percent and 25 percent.
In addition, a development strategy aimed at increasing food production, exports, and employment - was enunciated that emphasized rural development in general, and smallholder agriculture in particular.
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A palm-oil plant nursery in the Ivory Coast.
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Trend in Lending, 1974-83
(US$ millions. Fiscal years.)
(00) Number of operations.
Country fiscal 1981-83 borrowers, Population (000) GNP 19812 Per capita (USS)
