Global crisis to impact on Sub-Saharan African economy

Kuala Lumpur News.Net
Friday 10th October, 2008 (Kent Klein )

The global financial crisis is expected to slow sub-Saharan Africa's economic progress for the near future.

The International Monetary Fund says spikes in global food and fuel prices are also causing trouble for the African economy.

Economic growth in the region is expected to slow from 6.5 percent in 2007 to six percent in 2008 and 2009, according to Antoinette Sayeh, the director of the International Monetary Fund's African Department. 'Sub-Saharan African growth remains strong, but could weaken on account of lower capital inflows, lower global growth and potentially weaker commodity prices.'

Sayeh says I.M.F.'s regional economic outlook shows that the global financial turmoil has had only a moderate impact on sub-Saharan Africa, but that the effects could intensify over the next year.

What Sayeh calls the 'global food and fuel price shock' has led the I.M.F. to predict much more trouble from inflation than it had six months ago. 'When we exclude Zimbabwe, inflation is projected to increase to 12 percent in 2008, before falling back to ten percent in 2009. As a result of rising prices, particularly of food, poverty may well be on the rise in 2008,' he said.

As a result of the expected rise in inflation, Sayeh expects a rise in poverty in Africa. 'To protect the poor, policymakers have so far tended to reduce taxes and tariffs on fuel and food items, and to increase subsidies for these items. But these measures usually have benefited a broader segment of the population, and therefore, been of limited value to the poor.'

The I.M.F. says support from donors has not increased to cover the larger import bills caused by the higher fuel and food prices, which means individual countries will have to make up the difference.

Sayeh says African countries need to be able to respond quickly to unexpected economic shocks from outside, such as the higher costs of food and fuel, and the global financial crisis.

Earlier Friday, the United Nations' top economic official in Africa, UNECA Secretary General Abdoulie Janneh, said he expects the global economic crisis to hurt efforts to fight Africa's food shortage. But he said he was confident Africa will emerge from the crisis even stronger.

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