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IMF warns African oil producers to avoid “white elephants”

By on October 23, 2012

The International Monetary Fund has urged African oil and gas producing nations to direct their revenue in infrastructure and education rather than on “white elephants”.

A photographer takes pictures through a glass carrying the International Monetary Fund logo during a news conference in Bucharest

Exploration in east and southern Africa has been high in recent months as a result of big oil and gas discoveries in Tanzania, Mozambique, Kenya and other regional countries.

Antoinette Sayeh, the IMF’s director for Africa, said on Monday the oil and gas sector does not create as many jobs as other sectors of the economy, but if the revenues were directed to education and transport links they would help create jobs.

Sayeh said nations could set up sovereign wealth funds to invest for future generations and to provide cash, which could be used to help their economies navigate times of volatility in the global economy.

“It is not enough just to maximise your revenues and then to spend them on white elephants, you have to really be using them wisely and leaving some of the wealth for future generations as well,” she said.

Sayeh said the IMF is advising Mozambique, Tanzania and Niger to help them boost revenues from oil and gas exports.

The Washington-based agency projected in its Regional Economic Outlook launched in Japan earlier this month that Sub-Saharan Africa will grow by 5.25 percent this year and next, driven by robust domestic demand, investments and newly-found natural resources.

Despite this forecast, there are concerns that although some of the world’s fastest growing economies are African, the rapid growth rates have failed the inclusion test due to lack of jobs especially among young people.

The IMF has predicted inflation in the region would fall to 8 percent at the end of this year from 10 percent in the same time last year, before falling further to 7 percent in 2013.

Sayeh urged policymakers in countries that are still facing double-digit inflation, like Nigeria, Guinea, Malawi and Ethiopia to adopt policies that will help lower inflation.