The steep decline in the prices of commodities (oil, minerals, metals) following the global financial crisis is clearly having an effect on African countries. But the effect is asymmetric between importers and exporters of commodities. For instance, oil importers, who suffered in 2008 from the sharp increase in oil prices (reaching $140 a barrel), will benefit from the decline in oil prices, whereas the reverse is true for oil exporters. Using the latest commodity forecasts available, my colleague
My colleague Justin Lin says that it is important not to let the global financial crisis become “a human crisis.” Nowhere is this truer than in Africa. Although spared the first-round effects of banking failures, Africa is already facing the second-round impacts of declining capital flows, slowing remittances, stagnating foreign aid and falling commodity prices and export revenues. The c
I received this missive from a friend:
December 11, 2008
La réponse de l’Afrique à la crise économique actuelle doit se faire sur plusieurs façades. Une reforme des politiques commerciales permettant l’épanouissement du secteur privé devrait être au centre de tout effort tendant à minimiser l’impact sur les économies africaine à court terme et à long terme des perturbations des marchés.
There are many factors which will impact Africa’s ability to weather the current economic crisis. Finding ways to reform trade policy that enhances private sector growth should be part of any strategy now and in the long-term to counteract the damage today’s economic crisis is having. As Shanta noted in his lecture in November at Columbia, private sector growth is a key priority for Africa.
The direct financial effects of the global financial crisis have so far been limited due to Zambia’s reliance in domestic funding and limited exposure to external credit lines. However, the central bank has increased interest rates sharply as a result of portfolio outflows.
The main impact of the global financial crisis on the DRC economy is the slowdown in overall economic growth, which is projected to be 6 percent in 2009. With the crisis going on, the situation is likely to deteriorate. Two of the major sectors expected to drive DRC growth in 2009, i.e. infrastructure and mostly mining, have already been severely affected by the crisis.
I gave one of the keynotes (based on joint work with Markus Goldstein) at the recent ICASA 2008 in Dakar, Senegal on the title of this post. The fight against AIDS involves allocating scarce resources to multiple uses; and contracting, avoiding, preventing, testing for, and treating the disease all involve behavioral choices.
At a recent AERC research workshop in Nairobi, I made a comment about African governments’ not spending enough money on public goods, and spending too much on private goods such as fertilizers. The comment seemed to have struck a nerve. Several people in the audience pointed out that, in Malawi, fertilizer subsidies have increased cereal production, so government spending on fertilizers was not such a bad thing. Going beyond the general arguments that these fertilizer subsidies often don’t reach farmers (they’re
In the last few years, Lesotho has made significant progress in macroeconomic performance (strong GDP growth, fiscal surplus, current account surplus, and high international reserves). Nevertheless, Lesotho remains exposed to economic developments in South Africa (through the monetary union and the pegged exchange rate) and relies heavily on workers’ remittances, customs revenues from SACU, and royalties for transfer of water to South Africa.