Africa’s Economic Growth Will Drop – IMF

The International Monetary Fund (IMF) has warned that Africa’s economic growth will plummet because of the world economic downturn.

It predicts that growth in sub-Saharan Africa will slow to 1.5 percent in 2009, below the rate of population growth.

In March, the IMF was predicting growth of 3.25 percent but the slump in commodity prices and the credit squeeze were the main factors for the revision.

The IMF said Africa will need more concessional aid to ride out the slump. “Let us not forget the stakes, which given the vulnerability of Africa’s population, are higher than in other regions of the world” IMF managing director Dominique Strauss-Kahn said.

It is a sharp turnaround for the African economies, which has been growing at around 6 percent per year since 2000, raising hopes that poverty rates can be reduced.

“In many respects, Africa is the innocent victim of this financial tsunami,” said IMF managing director Dominique Strauss-Kahn.

But he warned that the “depth and breath of the crisis” and the “unprecedented collapse in world trade” has meant that demand for African exports is “collapsing fast.”

In addition, “although African banks avoided exposure to toxic assets, private capital is retreating, with both portfolio inflows and foreign direct investment drying up.” And, he added, “Let us not forget the stakes, which given the vulnerability of Africa’s population, are higher than in other regions of the world.”

The IMF said that Africa will need at least the doubling of aid promised at the Gleneagels summit in 2005. “Without additional support, poverty reduction and economic development in Africa could be set back several years and political stability might be endangered in some countries,” it said.

In addition, the IMF is planning to lend an additional $6 billion (€4 billion) to African countries at low interest rates over the next two to three years, after the G-20 increased its resources at the London summit in April.

The IMF said that, it is also making its lending programmes more flexible, streamlining its programmes and making the conditions for lending less tough.

“Fiscal target have been loosened in 80 percent cent of African countries,” it said, “giving them more breathing space to deal with the crisis.”

The IMF is now providing emergency support to a growing number of African countries, but it warned that more help is needed.

Source: Daily Graphic