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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The search for credible agencies of restraint for economic policy reform in contemporary Africa
Author:Kalinde, Leonard NkoleISNI
Periodical:Zambia Law Journal
Geographic term:Africa
economic integration
economic policy
regulatory agencies
Abstract:Africa is seen by potential investors as the riskiest region in the world. This is an important constraint on African growth because of its deterrent effect on private investment. The single most important perceived risk is the fear of policy reversal, followed by the fear of social disorder and civil war. Africa therefore needs institutions that convincingly establish policy stability and credibility. A government that faces a credibility problem can overcome it through building up its reputation. If it wishes to lock itself into particular policies it can construct either a domestic or an external agency of restraint that works either by means of enacting policy rules (penalties) or by delegating authority to an independent agent (authority shedding). Credible agencies of restraint are more likely to be external than domestic. Donor conditionality, the most important external agency of restraint for African governments to date, has not been effective. The current need of African governments for external agencies of restraint can be met through the intergovernmental creation of agencies that work by means of reciprocal threats. This approach to pan-African economic integration departs from the traditional approaches by suggesting that its virtue lies not in its ability to stimulate trade, but rather in its ability to provide a stable macroeconomic framework whose credibility, in turn, draws in increased domestic and foreign investment. Agencies of restraint may themselves face credibility problems and the ideal agency of restraint is one that achieves credibility at its creation or, failing this, one that works by authority shedding. For economic integration arrangements to be effective as external agencies of restraint their governance structures must be devised so as to maximize the likelihood of rules being respected. Ref. [ASC Leiden abstract]