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International Monetary Fund. African Dept.
This Selected Issues paper analyzes policies that can raise potential growth in small middle-income countries (SMICs) of sub-Saharan Africa (SSA). The findings suggest that although macroeconomic stability and trade openness are necessary for productivity growth, they are not sufficient. SMICs in SSA need to improve the quality of their public spending, most notably on education, to solve the problem of skill mismatch in the labor market, reduce the regulatory burden on firms, improve access to financing by small and medium-size enterprises, and pave the way for structural transformation in these economies. Given the short-term cost of these reforms, the timing and sequencing of reforms and the role of quick wins is important for their implementation. In some cases, a social bargain can be a mechanism to generate consensus around a package of mutually reinforcing reforms.
Aidar Abdychev, La-Bhus Fah Jirasavetakul, Mr. Andrew W Jonelis, Mr. Lamin Y Leigh, Ashwin Moheeput, Friska Parulian, Ara Stepanyan, and Albert Touna Mama
Many small middle-income countries (SMICs) in sub-Saharan Africa (SSA) have experienced a moderation in growth in recent years. Although factor accumulation, most notably capital deepening, was crucial to the success of many SMICs historically, this growth model appears to have run its course. The analysis in this paper suggests that the decline in the contribution of total factor productivity (TFP) to growth is largely responsible for the slowdown in trend growth in many SMICs, which highlights the need for policy actions to reinvigorate productivity growth. This paper explores the question of what kind of structural policies could boost productivity growth in SMICs and the political economy factors that may be contributing to the slow implementation of these critical reforms in these countries. The findings suggest that although macroeconomic stability and trade openness are necessary for productivity growth, they are not sufficient. SMICs need to improve the quality of their public spending, most notably in education to minimize the skill mismatch in the labor market, reduce the regulatory burden on firms, improve access to finance by small and medium-sized enterprises and create the enabling environment to facilitate structural transformation in these economies.
International Monetary Fund. African Dept.

-INCOME-COUNTRIES OF SSA A. Introduction B. Literature Review: Determinants of Total Factor Productivity (TFP) C. Stylized Facts D. Empirical Analysis E. Conclusions References BOX 1. Structural Transformation in Selected SMICs in SSA—Mauritius and Namibia FIGURES 1. SMICs of SSA: Growth Development 2. SSA MICs Growth Decomposition 3. Factors Affecting Productivity in Selected SMICs in SSA TABLES 1. Structural Impediments to Productivity Enhancement in Selected SMICs 2. Summary of the Empirical Results 3. Dynamic Panel Result (System GMM

International Monetary Fund. African Dept.

are benchmarked against Caribbean countries and Southern African Development Community (SADC) members. 5 These countries are chosen as Seychelles’ peer group because the former includes most of the tourism-dependent small economies and the latter includes most of the small middle-income countries (SMICs) in SSA. 6 Capital spending’s share in total spending is 12¾ percent in Seychelles, while this share slightly exceeds 20 percent on average among Caribbean countries and SADC members ( see text chart ). Meanwhile, the share of wage bill and goods and services in

Aidar Abdychev, La-Bhus Fah Jirasavetakul, Mr. Andrew W Jonelis, Mr. Lamin Y Leigh, Ashwin Moheeput, Friska Parulian, Ara Stepanyan, and Albert Touna Mama

A. Introduction 1. Prudent macroeconomic management and improved institutional settings in many of the SMICs in SSA delivered impressive economic performance in the last few decades. 1 A prolonged period of strong growth has raised overall incomes and delivered good economic outcomes. GDP per capita of SMICs of SSA on average increased by more than 5 times over the last 30 years compared to only 1.7 times increase for the SSA average excluding South Africa and Nigeria (Text chart). The governments of these countries have generally been effective in

International Monetary Fund. African Dept.

institutional settings in many of the SMICs in SSA delivered impressive economic performance in the last few decades. 1 A prolonged period of strong growth has raised overall incomes and delivered good economic outcomes. GDP per capita of SMICs of SSA on average increased by more than 5 times over the last 30 years compared to only 1.7 times increase for the SSA average excluding South Africa and Nigeria (text chart on page 3). The governments of these countries have generally been effective in addressing the countries’ development challenges, including narrowing the

International Monetary Fund. African Dept.
This Selected Issues paper discusses measures to enhance resilience to climate and natural disasters in Seychelles. Rising sea levels, changing rainfall patterns, increasingly intense and frequent tropical cyclones, and massive coral bleaching are compounding economic and social risks in Seychelles. A policy mix focused on combining adaptation and mitigation strategies is ideal for Seychelles. Such policies should not only be aligned with Seychelles’ Nationally Determined Contribution, but also with the technical and financial capacity of the government. Experience from other small states suggests that small policy changes can still have a significant impact. To the extent adaptation and mitigation measures are inadequate, insurance policies and innovative financial instruments need to be exploited further.