Introduction

Improved policies continued to fuel Africa's economic recovery, strengthening the reform momentum and the resolve of donors and African countries to work together. This gives cause for optimism as Africa's agenda moves beyond recovery to focus on development. The Bank's strategy--in addition to its primary goal of reducing poverty--focuses on two interrelated objectives that are critical to Africa's development: building institutional and human capacity and enhancing knowledge and its dissemination.

Sub-Saharan Africa's economic recovery both accelerated and spread to more countries in 1996. In sharp contrast to the early 1990s, the region's gross domestic product (GDP) grew faster than the population for the second year in a row. Estimated GDP growth was 4.9 percent in 1996 compared to 3.6 percent in 1995 (see Figure 3-1). Growth was widely shared, although rates varied between countries: twenty-three countries accelerated their GDP growth, seven reversed their GDP decline, and thirty-four recorded an improvement in per capita income, many of them significantly and some for the first time in years. In most countries, exports rebounded, too, and evidence continues to confirm the link between good policies and good economic performance, especially in the poorer African countries. Between 1994-96, the forty countries in the region with GDP per capita of less than $1,000 grew by 3.1 percent on average per year, but countries that implemented policies conducive to social and macro-economic stability and efficiently allocated their resources among key parts of the economy bettered that rate, growing by 4.6 percent annually (see Figure 3-2). Better policies resulted in a more broad-based recovery than in 1995. Budget deficits, though still unsustainably high, declined as a percentage of GDP nearly everywhere, helping to bring inflation down for the second year in a row in several countries. Performance benefited from the stronger ownership of reform programs displayed by a new class of committed leadership in many parts of the continent.

Yet improvements are fragile, and the threat of reversal is real in some cases. Several countries are mired in strife or civil disorder. Social indicators remain below those of other regions; fiscal deficits are high and domestic savings low; aid dependency remains high; private investment and foreign direct investment levels, though beginning to improve, are low; and there is a significant unfinished agenda in areas such as the financial sector, public expenditure management, and privatization. But in sharp contrast to the past--when the improved economic fortunes of individual countries tended to weaken rather than strengthen the resolve to continue reforms--Africa's recent economic performance has energized both African leaders and donors. Donors have responded positively by launching the fourth phase (1997-99) of the Special Program of Assistance (SPA) for low-income, debt-burdened countries in Africa, with indications of new support of about $5 billion of highly concessional, quick-disbursing assistance for the period, to be used in conjunction with World Bank and IMF programs. Today there is cautious optimism about Africa's future, with a new openness to taking risks, trying new ideas, setting bolder targets, and looking beyond the near term. The entry of South Africa as an active participant onto the African economic scene contributes to the recent optimism. All of this is refreshingly new for Africa.

World Bank loans and International Development Association (IDA) credits approved by the executive directors in fiscal 1997 totaled $1,736.7 million--compared to $2,740.1 in fiscal 1996. The number of operations approved fell to forty-nine compared with fifty-three in fiscal 1996. Table 3-1 shows the sectoral distribution of lending to the region for the 1988-97 period. Table 3-2 compares commitments, disbursements and net transfers to the region for fiscal years 1992-97, and table 3-3 shows operations in the Africa region approved by the Executive Board during fiscal 1997 by country. The dip in IDA commitments from $2,740.1 million in fiscal 1996 to $1,680.7 million in fiscal 1997 reflects greater selectivity in lending, the accelerated move by the Bank out of failed investment models, and the slow uptake of new strategies focused on decentralized implementation. While it is not yet possible to measure fully the transitional effect of the reorganization of the Africa regional office, it is estimated to have been small.