Saturday, February 07, 2009

News from African Union Summit: Leaders Still Lobbying for Vulnerability Fund

The Patriotic Vanguard
Reuters Africa

World Bank’s Vice-President for the Africa Region, Obiageli Ezekwesili, held a video teleconference with leading journalist throughout Africa recently and discussed ways to lessen the effect of the global credit crisis on Africa. At the top of her suggestions was the “vulnerability fund” recently advocated by the World Bank president, Robert Zoellick. World Bank leaders are urging the leading world economies to allot .7% of their economic stimulus plans for the African vulnerability fund.

The fund would go towards mitigating the effects of global drop in demand for commodities and private capital flow out of Africa, and to help fight Africa’s rising unemployment. Obiageli Ezekwesili also laid out plans for a safety net that would go towards providing the continents poorest citizens basic health and education. However, she urged African countries to improve their efficiency and transparency in spending the aid money. This, she claims, was the only way to insure economic growth. She stated that half of the $40 billion needed to close the infrastructure gap could raised by reforming governments and curtailing bureaucracy.

Not all experts believe that Western aid is the answer to Africa’s problems. Dambisa Moyo, a former economist at the World Bank, argues in her recent book that Africa should wean itself from aid. She claims that well-meaning Western aid helps encourage corruption and inefficiency in Africa countries. She views the current global financial crisis as an opportunity for Africa to come up with innovative financing, such as issuing bonds in Asian countries like China. She see trade and development projects with China as a way to mitigate lower levels of Western aid and private capital infusions. Finally, she argues that a drop in Western aid will not have any real effect on Africa’s poor citizens because the vast majority of the aid is pooled by rich public officials who do not spend the money effectively.

Regardless of who is correct, South Africa offers an example of the urgency of the unemployment problem in Africa. President Kgalema Motlanthe says his country is facing 23% unemployment and that the global credit crisis is frustrating attempts to get these workers back in action. It seems that both Obiageli Ezekwesili and Dambisa Moyo agree that African governments need to become more efficient and cut down on corruption and bureaucracy, but they differ on where the development money should come from. Who’s view is better is yet to be seen, but it is clear that Africa needs funds to help its dimming economic prospects.

1) Do you agree with Dambisa Moyo’s position on Western aid? Is it possible to combine both innovative financing with aid, or do you think aid needs to be completely cut off before Africa can change its ways?
2) How likely is it that the G20 will support the vulnerability fund at its April meeting in London? The fund only asks for .7% of each countries’ economic stimulus plans, but do you think they will willing to part with even this relatively small amount? Consider all of the criticsm related to the US’s proposed package. How politically popular would it be if Congress gives billions of dollars to Africa while many here in the US are feeling the pinch of recession?

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