Economic Downturn Hits Africa
March 11th, 2009 at 2:28 pm - by Tom Prout
Ahead of hosting the G20 global summit in London on April 2nd, British Prime Minister Gordon Brown is scheduled to meet African leaders next Monday to discuss their concerns over the current financial crisis. According to the International Monetary Fund’s (IMF) Managing Director Dominique Strauss-Kahn in a Dar es Salaam conference Tuesday, the economic outlook for Africa is dire, saying, “It is certainly time for advanced economies to be less arrogant.”.
Though there was no doubt, given the present financial climate, that the two-day conference would be one of gravity, but Mr. Strauss-Kahn’s forecast of only 3% growth for Africa signals not only stagnation of standards of living, but for many a deepening poverty. The IMF’s prediction for the global economy, not surprisingly grim, will have strong repercussions in Africa, a fact which has angered many on the continent.
The frustrated sentiment is caused by the realization that key aid programs promised to Africa by developed countries may very well not be honoured in light of the financial troubles they themselves are facing. For top African officials, the notion that their people will pay a heavy price for a crisis they did not play any part in creating sparked outrage; South African Finance Minister Trevor Manuel told Reuters “If an African country would have been the cause of the crisis, the IMF would have been at you like a tonne of bricks,”, condemning what he feels to be indifference to less developed countries.
Ngozi Okonjo-Iweala, Managing Director of the World Bank, warned African leaders that they may become the innocent victims of the ‘credit crunch’, citing that pledges by developed countries to double financial aid were not being lived up to, even prior to the crisis.
Okonjo-Iweala outlined plans for a high level reform commission on Monday, led by former Mexican president Ernesto Zedillo, to focus on “the modernization of World Bank Group governance so it can operate more dynamically, effectively, efficiently, and legitimately in a transformed global political economy.”, a statement by World Bank executives said.
The fear is, undoubtedly, that those aid donors in the developed hit by the recession will be unable to keep financial commitments, given their own concerns. Foreign aid to Africa is one of, if not the highest in the world, and one repeated call was for the IMF to review the conditions imposed on economic policy in return for aid: according to Mr. Strauss-Kahn, the IMF is already examining this policy.
By requesting a stronger say in IMF decisions, and ultimately a vote, many of the member nations fear their current decision-making power would be lessened by the further distribution of votes. Though this impedes progress slightly, the possibility is still being pursued; advocates of past aid donations have expressed their feelings that they have resulted in many African nations being better able to handle the impending recession. Had the financial assistance not been granted, some contributors speculate, those African countries who have experienced substantial growth over the past decade or so would not be equipped to handle the crisis at all.
Critics on the other side of the debate argue that had such levels of aid not been extended, the African economy would not be so broadly affected by a global crash. The conference in Dar es Salaam was initially intended as a discussion about the successes in development throughout Africa, but the reality is that the far reaching Western recession dominated talks, with little solid remedy offered for Africa’s problems.
At the upcoming Group of 20 (G20) summit in London, South Africa will be the only African nation involved in discussion, it was revealed at the talks in Dar es Salaam. Next Monday, March 16th, PM Gordon Brown plans to meet African leaders to discuss their concerns about the effects of the financial crisis on their economies.
Of the 21 countries the IMF views as most vulnerable to the economic crisis, 15 are African. The grim predictions for potential growth are less than half of the 6.7% foreseen earlier this year, and Mr. Strauss-Kahn stated that: “Even though the crisis has been slow in reaching Africa’s shores, we all know it is coming and its impact will be severe,”.