Monday, March 16, 2009

Credit Crisis' Effect on Africa a Hot Topic of Conversation

Sources: International Monetary Fund Press Release, IMF Warns Global Financial Crisis Threatens Africa’s Economic Successes; Changes: Successful Partnerships for Africa's Growth Challenge

On March 10th and March 11th, the IMF and Tanzanian president Jakaya Kikwete hosted Changes: Successful Partnerships for Africa's Growth Challenge, an international conference that united African finance ministers, central bank governors, and other international leaders such as former UN Secretary General Kofi Annan. One of the objectives of the conference was to showcase Africa's economic success over the past decade. Conference attendees also discussed how Africa will respond to the challenges posed by the global financial crisis and the types of partnerships that the region should forge with outside actors to weather the crisis.

One topic of discussion during the conference was the threat that the financial crisis poses to sub-Saharan economies. According a recent IMF report, over the past decade, sub-Saharan Africa has seen high rates of economic growth and rising income levels. IMF officials are now concerned that the credit crisis will counteract the region's economic progress.

Last week, the IMF released a report entitled "The Impact of the Global Financial Crisis on Sub-Saharan Africa." In the report, the IMF predicts that economic growth in sub-Saharan Africa for 2009 is going to decrease to 3.25%. This figure is a new one: last year, the IMF predicted that the region's growth for 2009 would be twice as high. Sub-Saharan Africa's growth rate for 2008 was 5%.

The IMF's African Department director, Antoinette Sayeh, African policymakers face two competing goals. On one hand, they should try to support domestic activity and focus on helping their poorest citizens. On the other, they should try to maintain macroeconomic stability. According to Sayeh, achieving both of these goals may be a challenge for those sub-Saharan countries that cannot afford to help their poor citizens due to constrains on their national budgets. Creating a "safety net" for the region's poorest is likely to be a more attainable goal for the countries who can afford to be more flexible with their fiscal policy.

It is possible that donations from outside actors may be the saving grace for countries that currently cannot afford to help their poor citizens. In Sayeh's opinion, this is a trying time for the region, and African policy makers can only do so much with the resources that they currently have to work with. In her view, it is time for donors to demonstrate their commitment to development in the region and step up their support.

Discussion Questions:

1- Do you think that involving outside donors will cause additional problems for sub-Saharan African countries? What do you think the political, financial, and cultural consequences would be of accepting an outside donation?

2- What are the additional issues that African policy makers are dealing with, aside from maintaining the balance between helping their poor and keeping their economies afloat? Should the IMF also be mentioning health issues or educational issues?

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