News / Africa

IMF: Rising Prices Threaten African Economic Recovery

A woman braids her friend's hair at a market in the Abobo neighborhood of Ivory Coast's main city Abidjan, April 17, 2011.
A woman braids her friend's hair at a market in the Abobo neighborhood of Ivory Coast's main city Abidjan, April 17, 2011.

The International Monetary Fund (IMF) says rising food and fuel prices are challenging sub-Saharan Africa's recovery from the global financial crisis.

The IMF says economic growth in sub-Saharan Africa has largely recovered from the global financial crisis, and is forecasting 5.5 percent GDP growth this year and nearly six percent in 2012.

But the region's central banks may be moving too slowly to raise interest rates to keep pace with higher food and fuel prices.  IMF deputy director for Africa Saul Lizondo says most sub-Saharan economies are now facing higher import bills, with the price of oil up more than one-third from last year.

"There is some concern about monetary policy, interest rates," said Lizondo.  "Real interest rates are much lower than they were before the crisis and now with this increase in oil and fuel prices we are concerned [with] the recovery in growth in these economies; we are concerned that this may have an impact on the inflation since monetary policy work with long lags. It is important to be proactive in this area and not wait for lots of evidence about the impact on prices because then it might be too late."

The IMF's 2011 Regional Economic Outlook for sub-Saharan Africa shows lower-income countries growing the fastest.  Ethiopia's economy is forecast to grow more than eight percent this year.  Middle-income countries are lagging behind.  South Africa's growth is projected to be just 3.5 percent.

Abebe Selasssie is the IMF Africa department's division chief.

"Most of the countries are recovering to pre-financial crisis growth rates, and if you remember this period was the best for the region going back to at least [the] 1970s," said Selasssie.  "So the countries have exhibited a lot of resilience. I think an important factor for this resilience has been the fact that these countries have relied on counter-cyclical policies to help cushion the adverse effects of the crisis on output."

Counter-cyclical economic policies seek to maintain stability by going against the current trend - cooling the economy when it is growing, for example, or stimulating growth when it is contracting.

High levels of foreign investment in smaller economies led to big swings in exchange rates when those investors pulled out during the financial crisis. Lizondo says some sub-Saharan economies may now consider limits on outside capital to lower the chance of that happening again.

"The best way to deal with these capital inflows is to strengthen financial systems and regulation supervisions to regulate this flow," added Lizondo. "Second, in terms of macro-economic polices for countries that have no reserves, they can accumulate reserves. The countries in which the exchange rate is undervalued can order for some appreciation, but there may be a situation in which all those measures are not very effective. In which case then, there may be a case for capital controls."

The IMF groups 11 sub-Saharan economies into what it calls "frontier markets" that have natural resources, viable financial markets, and relative political stability. Of those economies, Ghana, Mauritius, and Zambia have best recovered outside investment following the global financial crisis. The IMF says there has been no recovery in Tanzania or Uganda.

You May Like

NASA: Pluto Has Blue Sky

New photos also reveal the presence of water ice More

Report: US to Sail Warships Near Disputed S. China Sea Islands

Move will signal nonrecognition of Chinese territorial claims over area, Financial Times reports, citing senior US official More

Study Describes Ancient Deltas, Lakes on Mars

Research builds on recent NASA announcement that water flows on red planet today More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Hungary Criticized for Handling of Refugeesi
Henry Ridgwell
October 08, 2015 8:02 PM
Amnesty International has accused Hungary of breaking multiple international and European human rights laws in its handling of the refugee crisis. As Henry Ridgwell reports, thousands of migrants and refugees continue to travel through the Balkans to Hungary every day.

Video Hungary Criticized for Handling of Refugees

Amnesty International has accused Hungary of breaking multiple international and European human rights laws in its handling of the refugee crisis. As Henry Ridgwell reports, thousands of migrants and refugees continue to travel through the Balkans to Hungary every day.

Video Iraqi-Kurdish Teachers Vow to Continue Protest

Sixteen people were injured when police used tear gas and rubber bullets to disperse teachers and other public employees who took to the streets in Iraq’s Kurdish north, demanding their salaries from the Kurdish Regional Government (KRG). VOA’s Dilshad Anwar, in Sulaimaniya, caught up with protesting teachers who say they have not been paid for three months. Parke Brewer narrates his report.

Video Syrian Village Community Faces Double Displacement in Lebanon

Driven by war from their village in southwestern Syria, a group of families found shelter in Lebanon, resettling en masse in a half-built university to form one of the biggest settlements of its kind in Lebanon. Three years later, however, they now face being kicked out and dispersed in a country where finding shelter as a refugee can be especially tough. John Owens has more for VOA from the city of Saida, also known as Sidon.

Video Bat Colony: Unusual Tourist Attraction in Texas

The action hero Batman might be everyone’s favorite but real bats hardly get that kind of adoration. Put more than a million of these creatures of the night together and it only evokes images of horror. Sarah Zaman visited the largest urban bat colony in North America to see just how well bat and human get along with each other.

Video Device Shows Promise of Stopping Motion Sickness

It’s a sickening feeling — the dizziness, nausea and vomiting that comes with motion sickness. But a device now being developed could stop motion sickness by suppressing certain signals in the brain. VOA’s Deborah Block reports.

Video Making a Mint

While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Activists Decry Lagos Slum Demolition

Acting on a court order, authorities in Nigeria demolished a slum last month in the commercial capital, Lagos. But human rights activists say the order was illegal, and the community was razed to make way for a government housing project. Chris Stein has more from Lagos.

Video TPP Agreed, But Faces Stiff Opposition

President Barack Obama promoted the Trans-Pacific Partnership on Tuesday, one day after 12 Pacific Rim nations reached the free trade deal in Atlanta. The controversial pact that would involve about 40 percent of global trade still needs approval by lawmakers in respective countries. Zlatica Hoke reports Obama is facing strong opposition to the deal, including from members of his own party.

Video Ukranian Artist Portrays Putin in an Unusual Way

As Russian President Vladimir Putin was addressing the United Nations in New York last month, he was also being featured in an art exhibition in Washington. It’s not a flattering exhibit. It’s done by a Ukrainian artist in a unique medium. And its creator says it’s not only a work of art - it’s a political statement. VOA’s Tetiana Kharchenko has more.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

VOA Blogs