afrol News, 27 April - African Finance Ministers meeting in Washington at the weekend have welcomed commitments to increase resources for developing countries, but cautioned that assistance was needed quickly if Africa was to contain the impact of the global economic crisis.

Ministers in the 15-member African Consultative Group met at the International Monetary Fund in Washington with Managing Director Dominique Strauss-Kahn to discuss Africa’s response to the crisis and the risk that millions will be thrown back into poverty.

“The impact of the crisis on Africa will be severe,” said the co-chairs of the group, Samura Kamara, Minister of Finance and Economic Development of Sierra Leone, and Mr Strauss-Kahn.

“Growth will be lower, budgets will be strained, and external accounts will weaken. The remarkable gains achieved by Africa over the past decade are now under threat and there is a real risk that millions will be thrown back into poverty,” the co-chairs added.

Amongst issues disscussed at the joint IMF meeting, the ministers discussed implementation of the joint commitments made in Tanzania in March, when they identified a series of actions to protect and sustain Africa’s achievements in raising growth and reducing poverty and agreed on the importance of implementing these commitments.

During the discussions, the Managing Director reiterated that the IMF stands ready to supplement its policy advice with financial resources and will act quickly to provide African countries with the support they need. He noted that the IMF will make financing for low income countries more flexible and responsive to the diverse needs of African countries. He also emphasised that the IMF’s framework for assessing debt sustainability is being reexamined to ensure that it can accommodate Africa’s new financing needs and opportunities.

“We discussed the responses needed within African countries to support growth, preserve macroeconomic stability, and sustain momentum towards achieving the Millennium Development Goals (MDGs),” the consultative group said in a statement.

“We agreed that many countries are confronting the crisis from a stronger position than they have been in several years. Some countries have built up sufficient foreign reserves to cushion the external shock. Falling public debt and high savings have provided others with greater fiscal space to counter the crisis. Yet the challenges at this juncture are immense and many countries will need significant additional concessional financing to weather the crisis and to keep the MDGs within sight,” the group added in their statement.

The ministers agreed that in countries with flexible exchange rates and where inflationary pressures stemming from earlier increases in food and oil prices are starting to recede, there may be scope for more accommodative monetary policies to support growth.

“Fiscal policy must strike a balance between supporting growth while preserving macroeconomic stability and debt sustainability over the longer run. In many countries, there is room to let automatic stabilisers work or introduce stimulus measures to support growth. In other countries, where debt levels are already unsustainable or where financing constraints are binding, there may be little option but to tighten fiscal policies in response to the sharply weaker economic outlook. In all countries, however, priority should be given to strengthening social safety nets to minimise the adverse consequences of the downturn for the poor," the ministers stated.

They further stated that they reached an agreement that additional donor support will be critical in allowing a policy stance that is more supportive to growth, reiterating their call for the international community to fulfill the promises already made to increase aid flows to Africa.

The ministers also called on all countries to play their part in rejecting protectionism by ensuring that their borders remain open to trade and financial flows.

Addressing a press conference on Saturday, the ministers stressed that Africa was now acutely feeling the effects of the economic crisis that originated in the developed countries.

Mustafa Mkulo, Tanzania’s Minister for Finance and Economic Affairs, called on the rich nations to do more to help Africa by honouring their aid pledges, providing part of their stimulus funds to developing countries, bolstering the resources of the international financial institutions, and broadening market access to products from developing countries.

Growth for Sub-Saharan Africa is projected to reach only 1.5 percent in 2009, noted Mr Mkulo, citing the just-published outlook for the region.

“The crisis is now threatening to wipe out all our gains of the last ten years and disrupt our plans for further progress,” Mr Mkulo warned.

According to Charles Koffi Diby, Côte d’Ivoire’s Minister of Economy and Finance, the crisis is reaching Africa through three main channels: the collapse of world demand; the drop in commodities prices; and the indirect effects of the financial crisis, such as lower aid, foreign direct investment, and remittances, he said, further noting that at the same time, social costs are rising, as the ranks of the unemployed in many African countries swell.

The African ministers detailed their efforts to mitigate the effects of the crisis on their countries. Situmbeko Musokotwane, Zambia’s Minister of Finance and National Planning, spoke of his country’s plans to spur economic activity. “Obviously, there’s less room for a stimulus package in a country such as Zambia, but in a limited fashion, we’ve tried to do that,” he said.

Domestic borrowing in Zambia increased from 1.4 percent of GDP last year to 1.8 percent of GDP this year, Musokotwane explained. Most of this money will go to education, health, and social safety net expenditures.

The country also plans to put funds toward infrastructure that the government hopes will create the basis for private sector investment. “This crisis is not going to last forever,” he said, and observed that African countries should use this time to create conditions that will be favourable to investors once the crisis is over.

“We believe that this is really the future for Africa - to join in the leagues of what the Asian countries did decades ago,” Mr Musokotwane said.

Meanwhile, Tanazania could be one of the first African states to reap the benefits of the IMF's policy support instrument, according to Mr Strauss-Kahn.

“In the context of the ongoing dialogue under the Policy Support Instrument, an IMF staff mission and the Tanzanian authorities have reached broad agreement on policies that will help Tanzania address the impact of the global financial crisis. These policies aim at bolstering the Tanzanian economy, which has been affected by declining receipts from traditional exports and tourism, and protecting the most vulnerable segments of the population," he said in a statement yesterday.

The IMF chief said in supporting of these policies, and to help mitigate the exogenous shock stemming from the global economic downturn, Tanzania has requested financial support under the high-access component of the Exogenous Shocks Facility. It is expected that the request will be considered by the IMF's Executive Board before the end of May, Mr Strauss-Kahn said.

By staff writer

© afrol News

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