Africans Sort Out Financial Priorities As Nations Pursue Coordinated Rescue Plan
13 October 2008
In Washington, African finance ministers on the sidelines of the annual meetings of the World Bank and International Monetary Fund (IMF) began assessing the impact of economic rescue measures unveiled over the weekend. During urgent weekend meetings in Paris and Washington, the leading European, American, and Japanese industrial powers pledged to pour more than a trillion dollars into imperiled banks across the globe to help extend loans and investment and resuscitate a shattered credit market. As the recovery package started to calm world financial anxieties on Monday, African countries indirectly, but clearly impacted by the imminent financial collapse started to evaluate how best to shore up international organization support and donor government pledges in the wake of the crisis. World Bank communications director for Africa Herbert Boh explains what priorities developing countries must salvage from the shaky climate.
“The key thing that was on the line, especially for countries in Africa, was the need for African countries, many of which are not as exposed, given that most banks in Africa hold their loans on their balance sheets. They do not have a derivative market, and they also have a small secondary financial market. So because of this, the attention was being drawn to African countries to make sure that they continue to work on their macro-economic stability issues and continue to work on inflation issues and ensure that growth continues to benefit the poor,” he said.
Last year, African migrant workers employed in Europe and elsewhere sent home some $20 billion in earnings to help their Africa-based relatives escape poverty at home. This year, African countries face prospects of dwindling foreign derived investments on the continent and a possibility of diminishing income remittances from migrants working overseas, who are in greater jeopardy of losing their jobs because of the downturn. Boh says Africans need to protect themselves against falling back into deeper levels of poverty that could be precipitated by a falloff of foreign income finding its way into Africa.
“To the extent that these migrant workers were to lose their jobs in rich countries, it could very negatively impact the poor, not necessarily banks, because the money just transits through banks,” said Boh.
The World Bank official notes that the world crisis could have greater impact on African economic giants like Nigeria and South Africa, which are more actively engaged in international finance. He says those two powers account for 54 percent of the continent’s total Gross Domestic Product (GDP). But he also says that the commitment of industrial powers to bail out major globally oriented banks and lenders sends a positive sign to other African countries not likely to be as hard hit by the current crisis.
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Read full article at Voice of America (VOA)
