The impact of the financial crisis on the African financial system may be worse than we thought

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:

1. Weakened local investor confidence in equities and bonds on African Stock Exchanges
2. Return to ultraconservative lending practices
3. Losses arising from central bank reserve management practices
4. Renewed debate on the role of governments in the financial system
5. 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."