29 Nov 2008 |
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As world leaders gather for the United Nations Review Conference on finance for development, opening (today) Saturday in Doha, the capital of the Gulf State of Qatar, the call for a coordinated regional response to ensure that Africa is well represented within the new global financial architecture, could not be more opportune even as the would battles an unprecedented economic crisis. The 29 November – 2 December 2008 Doha Conference focusing on sufficient financing to meet key development goals amid mounting concern on the impact of the current global economic crisis, is a follow-up to the International Conference on Financing for Development (FfD) that took place in 2002 in Monterrey, Mexico. “With very serious threats to human development and macroeconomic stability in Africa looming on the horizon – and the very real possibility of an increase in protectionist trade policies by bruised economies and further marginalization of countries in the region – urgent action should be taken to ensure a coordinated regional response to ensure voice and representation of African countries within the new international financial architecture,” said UNDP acting Regional Director for Africa Moustapha Soumare, in a preview of the Doha meeting. According to him, “The time has come to discuss the need for counter-cyclical fiscal measures in the region and to forge some consensus on making structural changes to the global financial system.” Additionally, Soumare said: “there must be a push for the provision of adequate, quick and predictable disbursing of development finance to African countries.” Otherwise, he warned: “the region faces intolerable reverse in human development gains as a result of current and future crises.” “As Africa continues to integrate within the global economy more fully in terms of trade and finance it stands much to gain but also much to lose,” the UN official added. The Doha talks will be crucial not just for the global economy but for many African countries as well, he said, adding that the current “financial crisis has rocked the foundations of many of the world’s most prosperous economies and threatens the welfare of hundreds of millions of people in the developing world.” According to Soumare: “While the epicentre, and the source, of the current financial meltdown, (are) in the world’s most advanced economies, this crisis has the potential to hit Africa hard. In addition to the current financial turmoil, many countries on the continent also have to contend with an ongoing and extreme volatility of food and fuel prices while trying to mitigate the growing impact of climate change,” “Africa,” he said, “is no longer made up solely of isolated economies, disconnected from the world at large. Of course, different countries will be hit in different ways, with countries like mine-rich Angola and DRC facing different challenges than countries like Mozambique, Uganda and Rwanda, which are heavily reliant on Official Development Assistance (ODA) flows.” The UN official noted that Africa’s decade-old expansion into the global financial market had made it vulnerable to the global financial downturn, “even as it has opened up the region to new possibilities and relatively strong growth.” He said that last year, the region as a whole recorded over US$60 billion in mergers and acquisitions as Foreign Direct Investment (FDI) surged and several low income African countries launched highly successful debt issues on the international capital markets. Africa had also sought out and successfully partnered with emerging market countries, notably China, India and Brazil, “as it shifts away from near total dependence on aid and investment flow from more traditional donors of the developed world.” “As a result,” Soumare said: “many countries in the region are set to suffer too, alongside developed countries and the much-touted “Emerging Markets,” a group that, out of the Africa region, includes only South Africa.” His prediction is that “initially, African banks may begin to see vital trade credits from Western banks begin to disappear with an on-going credit crunch,” and “in the long-term, the banking system could be affected in substantial ways,” he said, adding that in recent years bank lending had grown greatly in a number of African countries such as Ghana, Kenya and Nigeria. “A deep and protracted downturn will affect the ability of borrowers to service their debts, leading to a rise in non-performing assets and solvency problems for many banks,” the UN official warned. In his view, “most worrisome, however, a downturn in growth, whether from falling commodity prices, reduced remittances, lower flows of ODAs, or other external shocks will, unless accompanied by fiscal intervention, lead to fiscal retrenchment and poverty-aggravating cuts in public expenditure.” “Most estimates, including one from the International Monetary Fund (IMF) in October, predict modestly slowing growth for the region through 2009, and a high rate of inflation for this year that will ease off during the next,” said Soumare. “But the IMF also points to the risks related to a much deeper and longer period of financial turmoil and resultant slowdown in global activity and commodity price volatility.” While some African countries may be able to cushion these effects with accumulated reserves, the UN official said “the vast majority will need to make macroeconomic adjustments that will include cuts in development expenditure, including spending on education and health, with all that this means for human development in Africa,” and “for African countries that are particularly dependent on ODA in-flows, the cuts could be painful indeed.” Noting that Doha’s timing “is not just critical but also opportune,” Soumare, said that “much has been made of the chance to use Doha as a springboard for articulating a new, more inclusive multilateral financial architecture that can address the current financial crisis and accompanying commodity and climate volatilities in a manner that reduces the likelihood of future crises and supports the development of low-income countries.” The aim is to create a new efficient and robust international financial system that can address current and future crisis with support for the development of low-income countries. The envisaged renewed international financial regime is also expected to provide incentives, financing and structures that can enable countries to enhance agricultural production, increase energy supply, address security threats, and reduce greenhouse-gas emissions under a coherent sustainable development and poverty reduction agenda. The call for a stronger Africa voice in international affairs including politics and the economy is not new. But the impact of the ongoing financial crisis forcing regional common solutions is driving home the point. There has been so much talk about the reform of the UN to make it more representative and the restructuring of the two Bretton Woods financial Institutions the World Bank and the International Monetary Fund (IMF), whose management are skewed in favour of the industrialized and rich North. There is no level playing field in world trade with African countries producing mainly primary commodities whose prices are determined by the rich buyers. But Africa is not zero-poor. Neither is foreign aid the answer to the region’s development problem. African governments must get their act together and put their houses in order, starting with the effective and efficient management of human and material resources that abound in the continent. Africa must realise that the North will not willing surrender the privileged trading position they enjoy. Individually, African counties cannot achieve much, so they must forge a collective regional front to make an impact, whether in economic or political world affairs.
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