IMF Advice on Capital Flows to Africa and the Middle East

1. This paper evaluates IMF advice to countries in the Sub-Saharan Africa (SSA) and Middle East and North Africa (MENA) regions on capital account liberalization and dealing with capital flow volatility. The paper provides a broad assessment of the Fund’s overall advice to each region, supplemented by a deeper look at three countries—Ethiopia and Kenya in SSA and Morocco in MENA. The paper focuses on so-called frontier markets, typically low-income economies that have recently gained access to significant private funding. It pays less attention to Fund advice to wealthier oil and gas exporters, which focuses on management of export revenues and diversification of the economy, or to Fund advice to fragile and conflict-affected states, where liberalizing the capital account and managing volatility of capital flows are not at the top of the policy agenda given domestic challenges.
2. The assessment is based on: desk reviews of the IMF’s Regional Economic Outlook (REO) reports for the two regions and the reports on Macroeconomic Developments and Prospects in Low-Income Developing Countries (LIDC), which the Fund launched in 2014; interviews with current and former staff members in the IMF’s African (AFR) and Middle East and Central Asia (MCD) departments; and interactions with outside experts. 1 Case studies of Ethiopia, Kenya, and Morocco draw in addition on interviews with officials in the three countries and the Fund’s country reports. 2

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