The conventional wisdom that African financial systems have little to worry about in the wake of the global financial crisis needs to be challenged. In the attached note, I raise five* concerns:
- Weakened local investor confidence in equities and bonds on African Stock Exchanges
- Return to ultraconservative lending practices
- Losses arising from central bank reserve management practices
- Renewed debate on the role of governments in the financial system
- Weakened balance sheets resulting from a downturn in the real economy.
In the note, I also propose policy options for dealing with these concerns.
*In the note, I say "four concerns" and then go on to list five, which confirms the old joke: "There are three kinds of economists. Those who can count and those who can't."