Scenarios for future growth

All countries face the challenge of designing and implementing macroeconomic policies that are appropriate to individual economies. Macroeconomic policymaking is never “easy”, in the sense that there is only one, obvious answer to how a particular policy should be designed and implemented. There are always choices to be made, and those choices have to be arrived at in an environment of uncertainty, reflecting a lack of complete information about how an economy (or the world) operates, and inadequate or incomplete data. And choices are always constrained, not just by the lack of information, but by politics, social structures, institutions, geography, and history. Experience suggests these choices more difficult in mineral economies. In principle, a mineral resource should provide a bounty or a windfall that raises growth rates and living standards. But the experience of many mineral economies shows that, especially in Africa, minerals have been associated with a lack of growth, macroeconomic instability, and often civil conflict. This presentation will consider some of the macroeconomic challenges and choices that face mineral economies, and explain how they can go well or badly. It will draw on the experience of Botswana, which has been one of the more successful economies in Africa, to a large extent because of the way in which mineral wealth has been used and invested, and will make some suggestions as to how some of the challenges facing mineral economies could be resolved in the case of South Sudan. Our focus will be on ways of minimising the adverse impact of exogenous shocks and achieving sustained, high and equitable growth rates of living standards. This entails coordinated sets of policy instruments: fiscal policy, monetary policy and exchange rate policy.The Distinctive Characteristics and Challenges of Mineral Economies