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

Turkey's Controversial Reform Bill Giving Investors Jitters

Homeland security reform bill will give police new powers in search, seizure, detention and arrests, while restricting the rights of suspects, their attorneys More

Audio Slideshow In Kenyan Prison, Good Grades Are Path to Freedom

Some inmates who get high marks could see their sentences commuted to non-custodial status More

'Rumble in the Jungle' Turns 40

'The Champ' knocked Foreman out to regain crown he had lost 7 years earlier when US government accused him of draft-dodging and boxing officials revoked his license More

This forum has been closed.
Comments
     
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.
Victorious Secularists Face Challenge to Form Government in Tunisiai
X
Henry Ridgwell
October 30, 2014 11:39 PM
Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid