Saturday, March 7, 2009

“Africa deserve financial bailout”

Tom Minney, AfricaNews reporter in Addis Ababa, Ethiopia

Many African countries are threatened with collapse or becoming failed states, Ethiopia's Prime Minister Meles Zenawi has warned. He told Heads of States at the just ended 12th AU summit that if their governments do not address the effects of climate change and the global financial crisis, some half of Africa's countries could be failing within 10 years.

He warned of difficult years ahead and urged African countries to lobby with one voice for compensation, as they are not the cause of either of the crises but are likely to be one of the hardest hit regions.

Experts said global warming is likely to cause more floods and drought, while soil scientists claim food production will be affected at a time when foreign investment and aid may be cut back.

Meles said: “A bank in these countries which is deemed too important to fail is getting more assistance, more bail-out money than the whole continent of Africa. We have to insist that Africa is at least as important in the global economy as the individual banks getting the bail-outs.”

Lower growth forecast

On Tuesday, the International Monetary Fund warned that Africa’s growth in 2009 is now forecast at 3.25 per cent, down three percentage points from its forecast of four months earlier.

The IMF Deputy Managing Director Takatoshi Kato told the African leaders that world growth would come to a virtual halt in 2009 - lowest rate in 60 years - and only recover next year. The global crisis would not spare Africa, which has been going through a period of strong growth, Kato added.

Later Reuters quoted a top IMF official, Africa Department Director Antoinette Sayeh, saying it could be worse. “The slowdown in growth could be much larger than we estimate currently.”

The slowing economy has sent demand for African exports tumbling and prices of commodities such as cotton, copper and oil have fallen. “Remittances, tourism revenue and even aid, we feel could fall further,” she said. Investment flows have also dropped as investors prefer to put their money into safer havens. This has created pressure on reserves and foreign exchange rates.

According to the report, Sayeh urged countries to take fiscal stimulus measures to support slumping demand while falling inflation may also leave room for central banks to ease monetary policy. “Inflation was a huge problem for the continent last year and it is just starting to come down, mainly due to oil prices,” she said. "Falling inflation across the board allows for some monetary easing in some countries."