Monday, April 27, 2009

AfDB cuts Africa growth forecast to 3.5 per cent

The African Development Bank cut its 2009 growth forecast for the continent to 3.5 per cent as export demand and commodity prices collapsed, the bank's President Donald Kaberuka said.

"Growth of 3.5 per cent for Africa means zero per cent increase in real per-capita incomes because the population is growing at three per cent or thereabouts," Kaberuka said in an interview in Dar es Salaam, Tanzania, where he is attending an International Monetary Fund conference. In January, the bank had forecast growth of about five per cent for Africa.

Recessions in the US, Europe and Japan have slashed demand for commodities, undermining economic growth in countries such as Zambia, Africa's biggest copper producer, and Nigeria, the continent's largest oil producer. The IMF's Managing Director Dominique Strauss-Kahn said on Tuesday its forecast for 3.3 per cent growth in Sub-Saharan Africa this year may be "too optimistic".

The AfDB plans to raise borrowing from about $2 billion (Dh7.34bn) last year to increase lending to poor African countries, Kaberuka said.

The bank has created a $1.2bn emergency liquidity facility that companies can use to borrow funds. Kaberuka said AfDB has sufficient capital to lend to members over the next five years and will double annual lending to $11bn to help countries deal with the global downturn, its president said.

The bank normally provides loans and grant handouts worth $5.5bn per year but expects more countries to turn to it for financial aid as the crisis spreads across the continent.

"The scenario for the crisis is to double that to come to around $10 to $11bn. We have in place the emergency liquidity facility – $1.5bn, the trade financing facilities – $1bn, and fast tracking the $2bn or thereabouts to poorer countries," Kaberuka said.

"That will leave a gap and that will be filled from our own capital resources. That is why it requires that we begin discussions on capital replenishment quickly, maybe around 2011," he said.

Kaberuka has warned there were signs that micro-credit for Africa's poorest, which had withstood the initial stages of the crisis, was now dwindling and he now feared rising social unrest.

Kaberuka said the prospects were discouraging, especially given unrest in countries such as Madagascar and Guinea Bissau, and uncertainty about how long the economic crisis would last.

For Africa, the economic crisis was just beginning, he warned.

"Frankly, we don't know how deep and prolonged this crisis will be. This is why it is important to provide all these [international finance] institutions with enough means and wherewithal to be able to respond in case we are in front of a prolonged crisis," he said.

The Tunis-based bank is 60 per cent owned by African countries and the remaining share is held by non-African states such as Brazil, China and Netherlands among others.