Posted by: africanpressorganization | 3 December 2008

“The global financial and economic crisis: African perspectives” / Summary of Statement by AfDB President, Dr Donald Kaberuka

 


 

“The global financial and economic crisis: African perspectives” / Summary of Statement by AfDB President, Dr Donald Kaberuka

 

TUNIS, Tunisia, December 3, 2008/African Press Organization (APO)/ — President Kaberuka, speaking at the UN Conference on Financing for Development in Doha said that the Monterrey Conference had agreed a compact of mutual actions; African countries had made progress since and were taking responsibility for their own development. Thus the timing of the financial crisis is particularly bad for Africa as it comes on top of the food and fuel crisis, worsening an already fragile situation.

 

He said that such a situation is a real test of leadership: for African countries development institutions should be willing and able to take the hard decisions necessary to avoid slipping back; and for donors to meet their commitments and act with the urgency the situation demanded.

 

He reiterated that in responding to the crisis, we must not forget the broader development agenda. Economic reforms have served well but the temptation for developed countries to just look inwards should be avoided.

 

He articulated that the impact of the financial crisis on Africa can be seen essentially via:

  1. Slowdown in Northern and emerging economies which would lead to reduced demand for African exports investment and remittances;
  2. Contagion via the macroeconomic effects of domestic contraction.

 

Lower aid and remittances will damage Africa. Non-performing loans could build up at banks weakening the financial system. More banks and companies can go under in a situation like this, necessitating interventions from Governments. Public expenditure will also be affected as, if domestic activity contracts, lower revenues will be generated. Several infrastructure projects are already being reduced or abandoned. Hence the key problem for Africa is not “Toxic Assets” but slow growth “Toxic macro-economy”.

 

President Kaberuka informed the meeting that there is growing evidence that trade credits are drying up and the World Bank and other MDBs are already setting up facilities to provide emergency funding and boost trade finance. The role of the MDBs in a situation like this is to help preserve banking stability, help consolidate reforms at policy level and to provide counter-cyclical finance. The AfDB is responding accordingly, and is considering new measures such as an emergency facility – of course consistent with maintaining a strong financial position for the Bank.

 

He recapitulated the key points as follows:

  • This is a broad crisis for development and as a result, maintaining commitments to development aid are even more important than before.
  • The crisis has shown how interrelated economies are. Hence, everyone (including the developing economies of Africa) should be represented in the international decision making fora.
  • It is an illusion to think that Africa has been spared from the effects of the crisis. Hence it is important that
    • The North keeps the commitments it has made and the Doha trade rounds succeed
    • We, the African economies keep our commitment to reforms.


He reiterated that it is important that in Doha, commitments towards international development assistance are confirmed and that the G20 framework of the “new architecture” goes beyond the narrow “financial crisis” to broad “development/human impact of the crisis”. Africa has already established a committee of Finance Ministers and Central / Regional Bank Governors to develop and communicate African views.

 

 

SOURCE : African Development Bank (AfDB)


Categories

%d bloggers like this: