Can you see that there are some lingo and decisions recommended by the NEPAD group in the resolutions.
By all stretch of imaginations, the Ethiopian Group has led Africa and developing world and has made a significant contribution.
Lessons of NEPAD and G20: Get engaged early always. Lessons for Diaspora get engaged all the time.
Stop the foolishness of disengagement right away. Get involved in your respective countries' business and increase the remittances and participation in investment and sustainable development issues in education, health, technology and micro enterprises to empower our sisters and mothers and daughters.
Remember: Societies that educate and engage their females lead all the time and win all the time!
Engage our smart educated females in all aspects of our lives.
Here is the G20 Summit Resolutions
Dr B
Leaders' statement from the G20 summit in London
G20 LONDON SUMMIT
World leaders met on Wednesday and Thursday in London to discuss measures to tackle the downturn. See our in-depth guide to the G20 summit.
The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the UK, the US and the EU.
1. We, the Leaders of the Group of Twenty, met in London on 2 April 2009.
2. We face the greatest challenge to the world economy in modern times; a crisis which has deepened since we last met, which affects the lives of women, men, and children in every country, and which all countries must join together to resolve. A global crisis requires a global solution.
3. We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared; and that our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries of the world too; and must reflect the interests, not just of today's population, but of future generations too. We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles, effective regulation, and strong global institutions.
4. We have today therefore pledged to do whatever is necessary to:
· restore confidence, growth, and jobs;
· repair the financial system to restore lending;
· strengthen financial regulation to rebuild trust;
· fund and reform our international financial institutions to overcome this crisis and prevent future ones;
· promote global trade and investment and reject protectionism, to underpin prosperity; and
· build an inclusive, green, and sustainable recovery.
By acting together to fulfil these pledges we will bring the world economy out of recession and prevent a crisis like this from recurring in the future.
5. The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR [IMF special drawing rights] allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs [Multilateral Development Banks], to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.
Restoring growth and jobs
6. We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 per cent, and accelerate the transition to a green economy. We are committed to deliver the scale of sustained fiscal effort necessary to restore growth.
7. Our central banks have also taken exceptional action. Interest rates have been cut aggressively in most countries, and our central banks have pledged to maintain expansionary policies for as long as needed and to use the full range of monetary policy instruments, including unconventional instruments, consistent with price stability.
8. Our actions to restore growth cannot be effective until we restore domestic lending and international capital flows. We have provided significant and comprehensive support to our banking systems to provide liquidity, recapitalise financial institutions, and address decisively the problem of impaired assets. We are committed to take all necessary actions to restore the normal flow of credit through the financial system and ensure the soundness of systemically important institutions, implementing our policies in line with the agreed G20 framework for restoring lending and repairing the financial sector.
9. Taken together, these actions will constitute the largest fiscal and monetary stimulus and the most comprehensive support programme for the financial sector in modern times. Acting together strengthens the impact and the exceptional policy actions announced so far must be implemented without delay. Today, we have further agreed over $1 trillion of additional resources for the world economy through our international financial institutions and trade finance.
10. Last month the IMF estimated that world growth in real terms would resume and rise to over 2 percent by the end of 2010. We are confident that the actions we have agreed today, and our unshakeable commitment to work together to restore growth and jobs, while preserving long-term fiscal sustainability, will accelerate the return to trend growth. We commit today to taking whatever action is necessary to secure that outcome, and we call on the IMF to assess regularly the actions taken and the global actions required.
11. We are resolved to ensure long-term fiscal sustainability and price stability and will put in place credible exit strategies from the measures that need to be taken now to support the financial sector and restore global demand. We are convinced that by implementing our agreed policies we will limit the longer-term costs to our economies, thereby reducing the scale of the fiscal consolidation necessary over the longer term.
12. We will conduct all our economic policies cooperatively and responsibly with regard to the impact on other countries and will refrain from competitive devaluation of our currencies and promote a stable and well-functioning international monetary system. We will support, now and in the future, to candid, even-handed, and independent IMF surveillance of our economies and financial sectors, of the impact of our policies on others, and of risks facing the global economy.
Strengthening financial supervision and regulation
13. Major failures in the financial sector and in financial regulation and supervision were fundamental causes of the crisis. Confidence will not be restored until we rebuild trust in our financial system. We will take action to build a stronger, more globally consistent, supervisory and regulatory framework for the future financial sector, which will support sustainable global growth and serve the needs of business and citizens.
14. We each agree to ensure our domestic regulatory systems are strong. But we also agree to establish the much greater consistency and systematic cooperation between countries, and the framework of internationally agreed high standards, that a global financial system requires. Strengthened regulation and supervision must promote propriety, integrity and transparency; guard against risk across the financial system; dampen rather than amplify the financial and economic cycle; reduce reliance on inappropriately risky sources of financing; and discourage excessive risk-taking. Regulators and supervisors must protect consumers and investors, support market discipline, avoid adverse impacts on other countries, reduce the scope for regulatory arbitrage, support competition and dynamism, and keep pace with innovation in the marketplace.
15. To this end we are implementing the Action Plan agreed at our last meeting, as set out in the attached progress report. We have today also issued a Declaration, Strengthening the Financial System. In particular we agree:
· to establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission;
· that the FSB should collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them;
· to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks;
· to extend regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds;
· to endorse and implement the FSF's tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms;
· to take action, once recovery is assured, to improve the quality, quantity, and international consistency of capital in the banking system. In future, regulation must prevent excessive leverage and require buffers of resources to be built up in good times;
· to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information;
· to call on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards; and
· to extend regulatory oversight and registration to Credit Rating Agencies to ensure they meet the international code of good practice, particularly to prevent unacceptable conflicts of interest.
16. We instruct our Finance Ministers to complete the implementation of these decisions in line with the timetable set out in the Action Plan. We have asked the FSB and the IMF to monitor progress, working with the Financial Action Taskforce and other relevant bodies, and to provide a report to the next meeting of our Finance Ministers in Scotland in November.
Strengthening our global financial institutions
17. Emerging markets and developing countries, which have been the engine of recent world growth, are also now facing challenges which are adding to the current downturn in the global economy. It is imperative for global confidence and economic recovery that capital continues to flow to them. This will require a substantial strengthening of the international financial institutions, particularly the IMF.
We have therefore agreed today to make available an additional $850 billion of resources through the global financial institutions to support growth in emerging market and developing countries by helping to finance counter-cyclical spending, bank recapitalisation, infrastructure, trade finance, balance of payments support, debt rollover, and social support. To this end:
· we have agreed to increase the resources available to the IMF through immediate financing from members of $250 billion, subsequently incorporated into an expanded and more flexible New Arrangements to Borrow, increased by up to $500 billion, and to consider market borrowing if necessary; and
· we support a substantial increase in lending of at least $100 billion by the Multilateral Development Banks (MDBs), including to low income countries, and ensure that all MDBs, including have the appropriate capital.
18. It is essential that these resources can be used effectively and flexibly to support growth. We welcome in this respect the progress made by the IMF with its new Flexible Credit Line (FCL) and its reformed lending and conditionality framework which will enable the IMF to ensure that its facilities address effectively the underlying causes of countries' balance of payments financing needs, particularly the withdrawal of external capital flows to the banking and corporate sectors. We support Mexico's decision to seek an FCL arrangement.
19. We have agreed to support a general SDR allocation which will inject $250 billion into the world economy and increase global liquidity, and urgent ratification of the Fourth Amendment.
20. In order for our financial institutions to help manage the crisis and prevent future crises we must strengthen their longer term relevance, effectiveness and legitimacy. So alongside the significant increase in resources agreed today we are determined to reform and modernise the international financial institutions to ensure they can assist members and shareholders effectively in the new challenges they face. We will reform their mandates, scope and governance to reflect changes in the world economy and the new challenges of globalisation, and that emerging and developing economies, including the poorest, must have greater voice and representation. This must be accompanied by action to increase the credibility and accountability of the institutions through better strategic oversight and decision making. To this end:
· we commit to implementing the package of IMF quota and voice reforms agreed in April 2008 and call on the IMF to complete the next review of quotas by January 2011;
· we agree that, alongside this, consideration should be given to greater involvement of the Fund's Governors in providing strategic direction to the IMF and increasing its accountability;
· we commit to implementing the World Bank reforms agreed in October 2008. We look forward to further recommendations, at the next meetings, on voice and representation reforms on an accelerated timescale, to be agreed by the 2010 Spring Meetings;
· we agree that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent, and merit-based selection process; and
· building on the current reviews of the IMF and World Bank we asked the Chairman, working with the G20 Finance Ministers, to consult widely in an inclusive process and report back to the next meeting with proposals for further reforms to improve the responsiveness and adaptability of the IFIs.
21. In addition to reforming our international financial institutions for the new challenges of globalisation we agreed on the desirability of a new global consensus on the key values and principles that will promote sustainable economic activity. We support discussion on such a charter for sustainable economic activity with a view to further discussion at our next meeting. We take note of the work started in other fora in this regard and look forward to further discussion of this charter for sustainable economic activity.
Resisting protectionism and promoting global trade and investment
22. World trade growth has underpinned rising prosperity for half a century. But it is now falling for the first time in 25 years. Falling demand is exacerbated by growing protectionist pressures and a withdrawal of trade credit. Reinvigorating world trade and investment is essential for restoring global growth. We will not repeat the historic mistakes of protectionism of previous eras. To this end:
· we reaffirm the commitment made in Washington: to refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organisation (WTO) inconsistent measures to stimulate exports. In addition we will rectify promptly any such measures. We extend this pledge to the end of 2010;
· we will minimise any negative impact on trade and investment of our domestic policy actions including fiscal policy and action in support of the financial sector. We will not retreat into financial protectionism, particularly measures that constrain worldwide capital flows, especially to developing countries;
· we will notify promptly the WTO of any such measures and we call on the WTO, together with other international bodies, within their respective mandates, to monitor and report publicly on our adherence to these undertakings on a quarterly basis;
· we will take, at the same time, whatever steps we can to promote and facilitate trade and investment; and
· we will ensure availability of at least $250 billion over the next two years to support trade finance through our export credit and investment agencies and through the MDBs. We also ask our regulators to make use of available flexibility in capital requirements for trade finance.
23. We remain committed to reaching an ambitious and balanced conclusion to the Doha Development Round, which is urgently needed. This could boost the global economy by at least $150 billion per annum. To achieve this we are committed to building on the progress already made, including with regard to modalities.
24. We will give renewed focus and political attention to this critical issue in the coming period and will use our continuing work and all international meetings that are relevant to drive progress.
Ensuring a fair and sustainable recovery for all
25. We are determined not only to restore growth but to lay the foundation for a fair and sustainable world economy. We recognise that the current crisis has a disproportionate impact on the vulnerable in the poorest countries and recognise our collective responsibility to mitigate the social impact of the crisis to minimise long-lasting damage to global potential. To this end:
· we reaffirm our historic commitment to meeting the Millennium Development Goals and to achieving our respective ODA [Overseas Development Agencies] pledges, including commitments on Aid for Trade, debt relief, and the Gleneagles commitments, especially to sub-Saharan Africa;
· the actions and decisions we have taken today will provide $50 billion to support social protection, boost trade and safeguard development in low income countries, as part of the significant increase in crisis support for these and other developing countries and emerging markets;
· we are making available resources for social protection for the poorest countries, including through investing in long-term food security and through voluntary bilateral contributions to the World Bank's Vulnerability Framework, including the Infrastructure Crisis Facility, and the Rapid Social Response Fund;
· we have committed, consistent with the new income model, that additional resources from agreed sales of IMF gold will be used, together with surplus income, to provide $6 billion additional concessional and flexible finance for the poorest countries over the next 2 to 3 years. We call on the IMF to come forward with concrete proposals at the Spring Meetings;
· we have agreed to review the flexibility of the Debt Sustainability Framework and call on the IMF and World Bank to report to the IMFC [International Monetary and Financial Committee] and Development Committee at the Annual Meetings; and
· we call on the UN, working with other global institutions, to establish an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable.
26. We recognise the human dimension to the crisis. We commit to support those affected by the crisis by creating employment opportunities and through income support measures. We will build a fair and family-friendly labour market for both women and men. We therefore welcome the reports of the London Jobs Conference and the Rome Social Summit and the key principles they proposed. We will support employment by stimulating growth, investing in education and training, and through active labour market policies, focusing on the most vulnerable. We call upon the ILO, working with other relevant organisations, to assess the actions taken and those required for the future.
27. We agreed to make the best possible use of investment funded by fiscal stimulus programmes towards the goal of building a resilient, sustainable, and green recovery. We will make the transition towards clean, innovative, resource efficient, low carbon technologies and infrastructure. We encourage the MDBs to contribute fully to the achievement of this objective. We will identify and work together on further measures to build sustainable economies.
28. We reaffirm our commitment to address the threat of irreversible climate change, based on the principle of common but differentiated responsibilities, and to reach agreement at the UN Climate Change conference in Copenhagen in December 2009.
Delivering our commitments
29. We have committed ourselves to work together with urgency and determination to translate these words into action. We agreed to meet again before the end of this year to review progress on our commitments.
Belai Habte-Jesus, MD, MPH
Global Strategic Enterprises, Inc. 4 Peace & Prosperity
Win-win synergestic Partnership 4P&P-focusing on
5Es: Education+Energy+Ecology+Economy+Enterprises
www.Globalbelai4u.blogspot.com; Globalbelai@yahoo.com
V: 571.225.5736; C: 703.933.8737; F: 703.531.0545
Our Passion is to reach our Individual and Collective Potential
--------------------------------------------------------------------------------
From: Belai FM Habte-Jesus
To: EPRDF-Supporters-Forum@yahoogroups.com; Dawit Yohannis
Cc: Addis-Ababa-university-alumni-owner@yahoogroups.com; Asratie Teferra
Sent: Thursday, April 2, 2009 1:26:50 PM
Subject: Re: The African Perspectivce of the Impact of G20 Conference in London
www.economist.com
Dear Patriotic Global Citizens and Friends of Ethiopia and Africa:
Please find attached the Economist Perspective and see how Africa fairs in their assessments if it fairs at all>
It is critical all the bloggers and African web sites, facebooks, twitters and yahoo groups, etc do their thinbg and make African Issue the Center of the Universe as Lucy or Dinkinesh did her part some Billions years ago!
Can we depennd on the current African Generation to do their part?
That is the question that should bug the brains of all Africans and Peopole of African descent.
I know, President Obama and PM Meles Zenawi and the NEPAD group are doing their part because of the attached evidence report that I sent out.
What about the rest of us?
My daughter 15 years old high school student from the US went to Ethiopia for her Spring Break to do a school project on the topic of:
why Ethiopia is the only nation in the world that kept her independence for millennia? I asked her to investigate can Ethiopia manage to avoid the Global Economic Crisis, MZ does not think so, What do you think?
Dear Reader,
As we went to press this week, the G20 meeting of world leaders was under way in London. We have plenty of coverage of their deliberations this week. But on our cover we look at a phenomenon reflected in the protests in London that could have just as great an effect on the world economy as the summiteers' promises: the backlash against the wealthy. Worries about inequality are nothing new; what gives the current backlash its sting is the widespread notion that the rich have cheated the rest of the world out of its rightful share, with bankers running a heads-I-win-tails-you-lose system. Our cover leader explains why bashing the rich is so tempting for politicians—and also potentially disastrous for everybody else. We also have a 14-page special report on the rise and fall of the wealthy.
Here are some other pieces from this week's issue you might also be interested in. You can click straight through to each one and read it online at Economist.com using the links below.
John Micklethwait
Editor in Chief
Subscribe now
THIS WEEK'S HIGHLIGHTS:
Russia's show trial
The Kafkaesque treatment of a fallen oligarch
A new driver at Government Motors
GM has a new boss, but it is really Barack Obama
Indonesia, a model for Muslims
From authoritarian basket-case to regional showpiece
I am just a poor boy, though my story's seldom told
The science that links childhood stress to poverty
Free speech and religion
Why it is important to protect individuals, not faiths
Highlights from this week's edition of The Economist
Subscribers have free access to all content on Economist.com
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Hard times for the rich | The G20 and the world economy | Democracy thrives in Indonesia | Barack Obama takes the wheel | The second trial of Mikhail Khodorkovsky | Japan has stagnated for 16 years | The recession changes shopping habits | Neuroscience and social deprivation | Recession and the semiconductor industry | Free speech and religious sensitivity | Exploring the mind of the Bard | John Hope Franklin, historian of America's blacks
More highlights »
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Belai Habte-Jesus, MD, MPH
Global Strategic Enterprises, Inc. 4 Peace & Prosperity
Win-win synergestic Partnership 4P&P-focusing on
5Es: Education+Energy+Ecology+Economy+Enterprises
www.Globalbelai4u.blogspot.com; Globalbelai@yahoo.com
V: 571.225.5736; C: 703.933.8737; F: 703.531.0545
Our Passion is to reach our Individual and Collective Potential
--------------------------------------------------------------------------------
From: Belai FM Habte-Jesus
To: EPRDF-Supporters-Forum@yahoogroups.com; Dawit Yohannis
Cc: Addis-Ababa-university-alumni-owner@yahoogroups.com; Asratie Teferra
Sent: Thursday, April 2, 2009 1:03:13 PM
Subject: Re: The African Perspectivce of the Impact of G20 Conference in London
Dear Patriotic Global Citizens and Friends of Ethiopia and Africa:
It is critical to appreciate that the Global Economic Crisis will hit most Africa and the African perspective is well documented here.
It is imperative all Diaspora and African institutions should critically reflect on this resport.
Here is the meat and let us make it taste good for our children, those who will inherit the impact of the Global Economic Crisis.
Please visit the African Renaissance web site at www.globalbelai4u.blgogspot.com for more infrmation.
Dr B
Impact of the crisis on African economies – Sustaining growth and poverty reduction
African Perspectives and Recommendations to the G20
A report from the Committee of African Finance Ministers and Central Bank Governors established to monitor the crisis. March 17, 2009
Download PDF of full document (225KB)
Executive Summary
Although most African countries are not on track to meet the Millennium Development Goals, Africa had made steady progress over the last decade, building the foundations for higher growth and poverty reduction.
This more optimistic picture is now being undermined by factors outside its control. While the initial effects of the financial crisis were slow to materialize in Africa, the impact is now becoming clear. It is sweeping away firms, mines, jobs, revenues, and livelihoods; it is in short a full blown development crisis. For the first time in a decade there will be zero growth per capita.
This note provides evidence of the effects, and suggests action needed. For Africa no less than elsewhere time is of essence; decisive remedial action is needed now.
The growth outlook has deteriorated severely. Macroeconomic balances have worsened, with many countries facing widening current account and budget deficits. The crisis is reducing trade, the mainstay of recent strong growth in Africa. The expected shortfall in export revenues amounts to USD251 billion in 2009 and USD277 billion in 2010 for the continent as whole, with oil exporters suffering the largest losses.
In addition to exports, capital inflows are also declining, including worker remittances and tourism receipts. The stocks of foreign reserves are running dangerously low, with some countries down to only a few weeks of import cover (for example, the DRC). This severely jeopardizes the capacity to import even basic commodities such as food, medical supplies, and agricultural inputs. The poor are the most affected.
The private sector has been affected by shortage of liquidity in international markets, with adverse impact on trade and investment. International banks have failed to issue lines of credit or even confirm pre-committed ones. Projects have been delayed, and some have already been cancelled.
African governments have undertaken measures to minimize the impacts of the crisis. These include: setting up special monitoring units, providing fiscal stimulus packages, revising budget expenditures, targeting assistance on key sectors, strengthening the regulation of the banking sector and markets, expansionary monetary policy, and foreign exchange controls to protect the exchange rate. The key concern is the deceleration of growth, which will disproportionately affect the poor. It is critically important to preserve the foundations of growth erected through steady policy reforms and improvements in the investment climate; this will allow the continent to resume growth after the crisis.
To achieve this goal, it is critical to sustain adequate levels of investment, especially in infrastructure. However, Africa’s ability to do so is severely limited. Pre-existing resource constraints are being exacerbated by a widening saving-investment gap. We estimate that just to sustain pre-crisis levels of growth in Africa would require an additional $50bn in 2009 and $56bn in 2010.
Increasing investment to the level needed to achieve higher, MDGs-consistent, growth rates, would require an additional $117bn in 2009 and $130 billion in 2010.
Previous, repeated, commitments to increase aid to Africa must be delivered quickly: speed of access is vital. But that alone will not be enough if Africa is to be able to restore a level of growth sufficient to reduce the levels of poverty. New and additional resources must be unlocked. Africa must be part of the global response to the crisis.
Our key recommendations to the G20 are:
Demonstrate political will and take action now
The severity of the crisis calls for the same sense of urgency as shown in rescue plans for banks and corporations in advanced economies.
Delivering quickly on existing commitments is key to donors’ credibility as committed development partners for the continent.
Protect the poor and the vulnerable by ensuring essential public investment programmes in health, education, nutrition, and sanitation can be maintained.
Support social safety nets to protect the poor, the unemployed and the socially marginalized.
Provide additional resources
Commit 0.7% of developed economies own stimulus packages to assist poorer countries, ensuring new initiative are truly additional to existing aid plans.
Augmenting the concessional resources available to the IMF and ease access.
Increase and sustain investment in infrastructure at national and regional level: stimulus packages must primarily target infrastructure projects.
Increase the resource envelope for regional development banks; in particular agree on an early review of capital adequacy of the African Development Bank.
Increase trade financing by injecting new resources for specialized facilities, including through regional development banks.
Increase policy space and flexibility, and reduce conditionality
Focusing on results, rather than prescribing rigid policies and actions, allowing countries space to respond according to their particular needs and circumstances.
Provide more predictable flows of aid, with more fast disbursing and front loaded assistance, consistent with African priorities.
Increase flexibility in macroeconomic frameworks to allow more scope to balance macroeconomic stability and the need to stimulate domestic demand.
Review debt sustainability criteria reviewed to allow access to credit to countries with adequate potential to borrow.
Reform procedures in order to promote more rapid and less conditional delivery.
Promote trade
Conclude an ambitious and development focused Doha Round, provide Aid for Trade, and technical assistance
Increase transparency, accountability, and equitable representation
Provide adequate voice and voting rights to African countries in IFIs and major global governing bodies
Tackle tax havens and assist in the recovery of Africa’s stolen wealth; enforce transparency in financial transactions in banking systems in advanced economies to deter illegal transfers of funds from African countries.
IMPACT OF THE CRISIS ON AFRICAN ECONOMIES –
SUSTAINING GROWTH AND POVERTY REDUCTION
African Perspectives and Recommendations to the G20
A report from the Committee of African Finance Ministers and Central Bank Governors
established to monitor the crisis.
March 17, 2009
- 1 -
Executive Summary
Although most African countries are not on track to meet the Millennium Development Goals,
Africa had made steady progress over the last decade, building the foundations for higher growth and poverty reduction. This more optimistic picture is now being undermined by factors outside its control. While the initial effects of the financial crisis were slow to materialize in Africa, the impact is now becoming clear. It is sweeping away firms, mines, jobs, revenues, and livelihoods;
it is in short a full blown development crisis. For the first time in a decade there will be zero growth per capita. This note provides evidence of the effects, and suggests action needed. For Africa no less than elsewhere time is of essence; decisive remedial action is needed now.
The growth outlook has deteriorated severely. Macroeconomic balances have worsened, with
many countries facing widening current account and budget deficits. The crisis is reducing trade, the mainstay of recent strong growth in Africa. The expected shortfall in export revenues amounts to USD251 billion in 2009 and USD277 billion in 2010 for the continent as whole, with oil exporters suffering the largest losses.
In addition to exports, capital inflows are also declining, including worker remittances and tourism receipts.
The stocks of foreign reserves are running dangerously low, with some countries down to only a few weeks of import cover (for example, the DRC). This severely jeopardizes the capacity to import even basic commodities such as food, medical supplies, and agricultural inputs.
The poor are the most affected. The private sector has been affected by shortage of liquidity in international markets, with adverse impact on trade and investment. International banks have failed to issue lines of credit or even confirm pre-committed ones. Projects have been delayed, and some have already been cancelled.
African governments have undertaken measures to minimize the impacts of the crisis.
These include: setting up special monitoring units, providing fiscal stimulus packages, revising budget expenditures, targeting assistance on key sectors, strengthening the regulation of the banking sector and markets, expansionary monetary policy, and foreign exchange controls to protect the exchange rate. The key concern is the deceleration of growth, which will disproportionately affect
the poor.
It is critically important to preserve the foundations of growth erected through steady
policy reforms and improvements in the investment climate; this will allow the continent to resume growth after the crisis.
To achieve this goal, it is critical to sustain adequate levels of investment, especially in infrastructure. However, Africa’s ability to do so is severely limited. Pre-existing resource constraints are being exacerbated by a widening saving-investment gap. We estimate that just to sustain pre-crisis levels of growth in Africa would require an additional $50bn in 2009 and $56bn in 2010.
Increasing investment to the level needed to achieve higher, MDGs-consistent, growth
rates, would require an additional $117bn in 2009 and $130 billion in 2010.
Previous, repeated, commitments to increase aid to Africa must be delivered quickly: speed of
access is vital. But that alone will not be enough if Africa is to be able to restore a level of growth sufficient to reduce the levels of poverty. New and additional resources must be unlocked. Africa must be part of the global response to the crisis.
- 2 -
Our key recommendations to the G20 are:
Demonstrate political will and take action now
• The severity of the crisis calls for the same sense of urgency as shown in rescue plans for
banks and corporations in advanced economies.
• Delivering quickly on existing commitments is key to donors’ credibility as committed
development partners for the continent.
• Protect the poor and the vulnerable by ensuring essential public investment programmes in
health, education, nutrition, and sanitation can be maintained.
• Support social safety nets to protect the poor, the unemployed and the socially
marginalized.
Provide additional resources
• Commit 0.7% of developed economies own stimulus packages to assist poorer countries,
ensuring new initiative are truly additional to existing aid plans.
• Augmenting the concessional resources available to the IMF and ease access.
• Increase and sustain investment in infrastructure at national and regional level: stimulus
packages must primarily target infrastructure projects.
• Increase the resource envelope for regional development banks; in particular agree on an
early review of capital adequacy of the African Development Bank.
• Increase trade financing by injecting new resources for specialized facilities, including
through regional development banks.
Increase policy space and flexibility, and reduce conditionality
• Focusing on results, rather than prescribing rigid policies and actions, allowing countries
space to respond according to their particular needs and circumstances.
• Provide more predictable flows of aid, with more fast disbursing and front loaded
assistance, consistent with African priorities.
• Increase flexibility in macroeconomic frameworks to allow more scope to balance
macroeconomic stability and the need to stimulate domestic demand.
• Review debt sustainability criteria reviewed to allow access to credit to countries with
adequate potential to borrow.
• Reform procedures in order to promote more rapid and less conditional delivery.
Promote trade
• Conclude an ambitious and development focused Doha Round, provide Aid for Trade, and
technical assistance
Increase transparency, accountability, and equitable representation
• Provide adequate voice and voting rights to African countries in IFIs and major global
governing bodies.
• Tackle tax havens and assist in the recovery of Africa’s stolen wealth; enforce transparency
in financial transactions in banking systems in advanced economies to deter illegal
transfers of funds from African countries.
- 1 -
1. Introduction
1.1 The crisis has come at a time when Africa was turning the corner, steadily
building the foundations for higher growth and poverty reduction. But still, most African
countries were lagging behind relative to their MDGs targets. The optimistic growth
outlook is now undermined by factors outside Africa’s control. While the initial effects of
the crisis were slow to materialize, the tide of the “Tsunami” is moving fast, sweeping
away firms, mines, jobs, revenues, and livelihoods. Time is of essence, decisive action
can wait no longer.
1.2 This note documents the severity of the impact of the crisis on African economies.
It attempts to portray the magnitude of the financing gaps that must be bridged in order to
not only stem off the crisis, but most importantly to preserve the basis for high growth
and poverty reduction.
The note demonstrates that while it is important for donors to
deliver on pre-committed pledges, those alone will not be sufficient to bridge the
widening financing gaps and maintain the growth momentum in the continent. It
especially argues for additionality of aid, flexibility in aid allocations and faster delivery mechanisms to improve responsiveness and alignment with country-specific needs and circumstances. It concludes with a set of concrete recommendations for the G20, the donor community at large, and African governments.
2. Impact
Overall assessment
2.1 Africa has been hit severely by the crisis, with its growth rate forecasted to dip
below 3 percent in 2009 (2.8%) for the first time since 2002 (Table 1). Sub-Saharan
Africa is expected to grow at a meager 2.5 per cent. Middle income countries have been hit severely due to their relatively higher integration into the global economy.
2.2 The slowdown in growth is primarily due to declining trade flows.
The expected short fall in export revenues is immense: USD 251 billion in 2009 and USD277 billion in 2010. Oil exporters will take the biggest hit, with a shortfall of USD 200 billion in 2009 and US$220 in 2010 (Table 2). With exports declining faster than imports, the trade balance will deteriorate in most countries. Exports for 2009 and 2010 have been revised downwards by 40 percent. As a result, from a comfortable overall current account surplus of 2.7 per cent of GDP for both 2008 and 2007, the continent will record an overall deficit of 4.3 per cent of GDP in 2009.
2.3 Capital inflows, which have been another important driver of recent growth, are
also declining. Similarly, most countries are experiencing a slow down in migrant
remittances as a result of the weakening economies in the West and in African advanced economies. For example, in Kenya, remittances have been steadily falling since October
2008 from US$ 61 million to US$ 39 million in January 2009. Tourism receipts were
- 2 -
down 13 percent in the 4th quarter of 2008 compared to 2007, further undermining the
country’s efforts to build up its foreign exchange reserve base.
2.4 The stocks of foreign exchange reserves are deteriorating. In the DRC, reserves
are down to only a few weeks of import cover. At this pace, many countries will not be
able to afford even basic commodity imports such as food, medical supplies, and
agricultural inputs.
2.5 Government revenues are also expected to decline. Diversified economies will be
less impacted than others. For example the 2009 forecasted government revenues for
Tunisia and South Africa have been revised downwards by 1.2 and 0.4 percentage points,
respectively. On the other hand, highly specialized economies such as Libya and Algeria
(oil-dependant countries) will see government revenues declining sharply by 17 and 16
percentage points, respectively in 2009.
2.6 Overall budget balances will worsen for the continent as a whole, going from a
global budgetary surplus of 2.8 per cent of GDP in 2008 to a deficit of 5.4 percent of
GDP in 2009. The impact on the budget is even worse for net oil-importing countries and
those with substantial food imports because of the carry-over effects of the high oil and
food prices of the past year. Oil exporters on their part are experiencing major declines
in revenues, and this is expected to persist through 2010. The crisis has underscored the
perils of the excessive concentration in production and exports in African economies.
2.7 Although low-income countries (LICs) are benefiting from the decline in oil
prices, they are experiencing difficulties due to falling prices and demand for their
commodity exports. Current account deficits are worsening. In addition FDI and
remittances are declining. While LICs as a group are forecast to grow faster than middle
income and oil-exporting countries in 2009, their populations will be severely affected by
the crisis due to their already relatively lower pre-crisis living standards.
2.8 The drying up of liquidity in international financial markets has hit the private
sector as well as governments. For governments, attempts to raise long-term finance
through sovereign bond issue have failed (South Africa), been canceled (Ghana Telecom
bond issue for USD300 million) or delayed (Eurobond issues for Kenya, Nigeria,
Tanzania and Uganda). This has caused costly delays in the implementation of planned
public infrastructure programs.
2.9 A number of private sector projects across Africa have been suspended or delayed
because some investors withdrew and the funding conditions became more constraining
due to higher spread and lower debt-to-equity exposure (Table 3). A gas project in North
Africa was suspended after its approval by the Bank in October 2008 because the
financing could not be closed. Moreover, seven infrastructure projects, where the AfDB
has been approached to provide funding, are currently delayed because of the crisis. The
financial crisis has led to an increase in the demand for AfDB’s funding for private sector
operations. The AfDB has been asked to step in several projects, some of which where it
was already involved, to provide additional funding. The Bank has recently granted two
- 3 -
loans extensions of EUR 70 million and USD 48.75 million, and a proposal for another
UA 229 million loan extension will be considered soon.
Specificity of the severity of the crisis at the country level1
Regional engines of growth were the first affected
2.10 Expectedly, the large, financially developed and open economies were the first to
be hit by the crisis through financial markets (South Africa, Egypt) and exports (oil for
Algeria and Nigeria, the mining sector for South Africa).
2.11 In South Africa the financial sector experienced a collapse of asset prices,
dramatic increases in the cost of capital, and a severe contraction in lending. This has led
to sharp downturns in the retail and manufacturing sectors. Between May 2008 and
March 2009, South Africa’s JALSH index has fallen by about 46 percent and the Rand
depreciated by 23 percent against the US dollar. Furthermore, the mining sector is
experiencing a large fall in output and employment, driven by lower world demand for
commodities.
2.12 Nigeria’s investment, output and government revenues have fallen significantly
due to declining prices for hydrocarbons (oil and gas). Oil and gas extraction account for
30 percent of the economy’s GDP, over 90 percent of its exports and a large share of
government revenues. While no major bank is under immediate threat in Nigeria, the
banking sector may be exposed to rising default risk of its clients operating in the exportoriented
sectors, including oil.
A resulting slow down in bank lending will amplify the effects of weak performance of the oil and gas sector on growth. While food price inflation is declining, this could be reversed by the significant depreciation of its currency. The decline in foreign exchange reserves due to lower exports is exacerbated by falling remittance inflows since the beginning of the crisis.
2.13 As the regional engines of growth weaken, this is expected to have significant
knock-on effects on smaller neighboring economies through trade linkages and worker
remittances. For example, remittances flows to the Democratic Republic of Congo (DRC)
are falling due to the slowdown in South Africa, further exacerbating the impact of the
decline in mineral exports.
Pre-crisis success stories are not spared.
2.14 The crisis is also affecting even those countries that had been experiencing several
years of sustained growth built upon improved economic fundamentals and prudent fiscal
policies. Botswana and Tunisia provide two instructive examples.
1 The African Development Bank greatly appreciates the support from African Central Banks and
Ministries of Finance, and regional Banks (BCEAO and BEAC) in providing country-level information on
the impact of the crisis and policy responses.
- 4 -
2.15 Botswana has experienced a sharp decline in industrial production, export and
government revenues. It has proved to be highly vulnerable to shocks due to its high
dependence on diamond exports (representing 35 to 50 percent of government revenues).
Its foreign reserves are falling rapidly, and the fall in mineral revenues is expected to be
prolonged, limiting the government’s ability to finance economic recovery plans. Its
growth rate is expected to remain below 3 percent in 2009 and 2010. The crisis has
underscored the critical role of export diversification in reinforcing the resilience of
economies to external shocks.
2.16 Tunisia has one of the most diversified economies in Africa. Nevertheless, it has
experienced the full spectrum of the economic downturn from contraction in industrial
production and exports to sharp declines in government revenues and foreign reserves.
Key sectors of the economy have been affected, from manufacturing to tourism. As a
result, its growth projections for 2009 have been revised downwards by 1.5 percentage
points between November 2008 and February 2009.
Mineral resource dependent and fragile states
2.17 Excessive specialization in minerals has proven to be even more disastrous for
countries with poor governance and weak state institutions. This is the case for the DRC
and the Central African Republic. Lower demand and prices for commodities are
compounded by high economic and political uncertainty. Risk aversion has induced
investors to relocate to lower risk countries, resulting in sharp decline in foreign direct
investment (FDI). The combination of falling export revenues, weak governance
capacity, and a prolonged retrenchment in investment aggravates already widespread
poverty and threatens the stability of these fragile states.
2.18 In the Democratic Republic of Congo, 100,000 jobs have been lost due to smelter
closures. Foreign reserves are down to about one week of imports; the country will soon
be unable to purchase imported essentials such as food, fuel, and medication.
2.19 In the Central African Republic exports of wood and diamonds have collapsed,
causing large losses of employment.
The Société d’Exploitation Forestière en
Centrafrique (SEFCA) has laid off half of its employees as its orders were cut by
half. The economy is basically on life support. Regional neighbors have contributed CFA
8 billion (more than USD15m) as the government was unable to pay the salaries of civil
servants. Debt arrears are accumulating, further undermining the country’s capacity to
mobilize external resources. This situation is clearly threatening the stability of a country
that is just coming out of conflict.
Oil-producing countries face declining fiscal revenues
2.20 Several oil-producing countries have been forced to severely curtail their public
expenditure plans, including public infrastructure investment, due to lower fiscal
revenues. In Angola, government revenue for 2009 is expected to be 24 percent lower
compared to 2008. The non-oil sectors, such as construction, manufacturing and services,
- 5 -
are heavily dependent on public sector demand and are also expected to slow down
considerably. The Angolan economy is expected to contract by 7 percent in 2009,
following a double digit growth rate in 2008 (15.8 percent), a reversal of almost -23
percent.
Agriculture dependent economies
2.21 The financial crisis has amplified the impacts of the food crisis. The depreciation
of national currencies against major reserve currencies has raised the cost of food
imports. This impact will be particularly harder on economies that have large deficits in
food trade.
Urban populations have been particularly affected as job opportunities shrink.
Attempts to subsidize food and oil prices are unsustainable due to low government
revenues and falling foreign exchange reserves. Ethiopia, for example, has been steadily
losing its reserves in the past few months. In turn, credit to the private sector has declined
considerably since the third quarter of 2008 as the government increased its domestic
borrowing to finance the oil subsidy bill. In just six months (August 2008 to February
2009) Kenya’s total usable reserves (official plus commercial banks holding) fell from
USD 5,287 million in to USD 4,726 million. Over the same period Kenyan Central
Bank’s reserves holding declined from 4.1 months of imports to 3.1 months (below the
statutory requirement of 4 months). By end February 2009, the Kenyan shilling had
depreciated by 15.7 percent against the US dollar relative to September 1, 2008.
3. Africa is trying, but the scope to do more is very limited
3.1 African governments have taken a number of initiatives to mitigate the impact of
financial and trade shocks. However its limited resources are inadequate in relation to the
scale of the impact. Many governments have set up special monitoring units to identify
the advance of the crisis and to formulate targeted responses. In addition, governments
have introduced a range of policy measures including fiscal stimulus packages, targeted
assistance to sectors, capital and exchange controls; new regulations in the banking
sectors, and expansionary monetary policies (see Table 4).
Fiscal stimulus packages
3.2 Emulating the example of developed and emerging economies, some African
governments have implemented fiscal stimulus plans. This includes increases in public
investment expenditures as well as tax reductions. However, in some countries, the
severity of the crisis has forced the governments to retrench and undertake a
contractionary fiscal policy.
3.3 In Mauritius the Government announced in January 2009 a stimulus package to
boost domestic demand and increase job creation. This package is worth 10.4 billion of
Mauritian Rupees (USD 0.3 billion), or approximately 3 percent of Mauritius GDP. In
Nigeria, the Government is contemplating using its USD 52 billion external reserves to
shore up the economy through a stimulus package.
- 6 -
3.4 The Liberian Government undertook a comprehensive revision of its Revenue
Code, proposing a 10 percent reduction in corporate and income tax rates in a bid to
stimulate private sector activity. In addition, the Government is planning to cut regional
trade tariffs by one quarter of a percentage point with a view of fostering trade within
ECOWAS. The South African government has proposed an adjustments to personal
income tax that should provide middle and lower income earners with R13.6 billion
(USD 1.35 billion) in tax relief.
3.5 In Senegal the government lowered budgetary expenditure by 4 percent of GDP
and priority expenditure by 0.6% of the GDP. Similar actions were taken in Cape Verde,
Sudan and Uganda. In Tunisia, the 2009 budget includes a significant increase in public
investments in line with its plan to increase external competitiveness and employment
and strengthen social protection. Similarly, in South Africa, the government increased
funding for public investment projects with allocation of R 690 billion (about USD 80
billion) over the next three years.
Targeted assistance to sectors
3.6 Many countries have implemented targeted sectoral assistance plans to support
sectors that are considered as key growth drivers. These measures are intended to reduce
job destruction and the loss of sector specific capital and know-how. In Nigeria, the
Government injected N70 billion into the severely weakened textile industry. The
Rwandan Government announced plans to reduce the quantity of its tea sold through
auctioning at Mombasa and improve direct sales to reach a target of USD 54 million tea
sales in 2009. In Uganda, the Government provided assistance to the transportation sector
by writing off public loans to companies.
Banking regulation and capital account controls
3.7 Prudential capital controls in most African banking systems have helped to
minimize contagion effects on African banks. These controls also reduced capital
outflows during the crisis. In addition, some governments have introduced deposit
insurance schemes.
3.8 In Tanzania, profit repatriation has been regulated to minimize contagion, as bank
subsidiaries cannot automatically transfer funds to compensate for losses in parent banks.
The Egyptian government has established a deposit insurance fund to boost public
confidence in banking sector.
3.9 In response to the large depreciation of their national currencies, governments
have undertaken a variety of measures to defend their currency or to boost competitive.
Some have attempted to defend a managed exchange rate. In some countries with fixed
exchange rate regimes, governments have devaluated their currencies to boost
competitiveness.
- 7 -
3.10 The Nigerian Central Bank had aggressively intervened in the foreign exchange
markets to stem the slide of the Naira. However, defending the Naira has proven
unsustainable in the context of declining export revenues. Other central banks have also
attempted to defend the national currency but have run out of reserves.
Expansionary monetary policy
3.11 Several countries have eased their monetary policy by cutting interest rates to
stimulate consumption and encourage borrowing. Examples include Botswana where the
Central Bank has cut its bank rate by 50 basis points to 15 percent in December 2008.
Similarly the Egyptian Central Bank has cut its benchmark interest rate for the first time
since April 2006. The Namibia’s Central Bank and the South African Reserve Bank also
reduced their repurchase rate to stimulate borrowing and boost private investment and
consumption.
Bond financing of public expenditure
3.12 Some countries have financed counter-cycle expenditures via the emission of
treasury bills and bonds. In Cape Verde, the Central Bank introduced Treasury bills to
encourage private saving to remain in the national financial system. The Kenyan
government issued an infrastructure bond that amounted to 18.5 billion shilling (USD
232.6 million) with 12-year maturity in February 2009. The bond was oversubscribed, a
testimony to the existence of a substantial untapped domestic saving capacity.
4. Africa is facing a large and growing financing gap
4.1 Notwithstanding all these laudable initiatives, it is clear that African governments
do not have adequate financing capacity to cushion populations against the impact of the
crisis and protect the gains recorded in the past years in terms of growth and poverty
reduction. The resources needed are immense and the savings are limited. Conservative
estimates demonstrate that even full delivery of pledged external assistance will not be
sufficient to bridge Africa’s growing financing gap.
4.2 The most important risk is that the shortage of financing will depress investment,
with damaging effects on growth, severely undermining the continent’s ability to achieve
the MDGs. Although African countries were growing faster before the crisis, the growth
rates were still not sufficient to achieve the MDGs. However, at the moment, even
preserving the pre-crisis growth rates seems untenable for many countries due to shortage
of financing.
4.3 We have estimated that for the continent to maintain its growth momentum of
2007, an infusion of large amounts of external financing will be needed to bridge the
investment-saving gap. Under the conservative scenario of maintaining growth at the precrisis
level, the resource gap amounts to USD50 billion for 2009 and USD56 billion for
2010. But of course, maintaining the growth rates at the pre-crisis levels will not allow
African countries to make substantial progress in reducing poverty. To raise growth rates
- 8 -
to the 7 percent minimum deemed necessary to achieve the MDGs, the continent would
need an infusion of about USD117 billion in 2009 and USD130 billion in 2010 to bridge
the investment-savings gap. The bulk of the investment would naturally go into
infrastructure. The Africa Infrastructure Country Diagnostic study2 estimated Africa’s
infrastructure needs at USD75.5 billion per year for the next 10 years, including capital
expenditure (USD38.1 billion) and operations and maintenance (USD37.4 billion) (see
also Figure A1 and Table A1).
4.4 Our estimates of the financing gap are in the same range as the ones generated by
sister institutions but much higher than the sums pledged by the development assistance
community before the crisis (Figure 1). The 2005 Gleneagles Summit committed to
raising aid to Africa by USD25 billion per year until 2010. This is virtually half the
amounts needed to only allow African countries to maintain their pre-crisis growth rates,
which is definitely not sufficient to bring the continent anywhere closer to meeting the
MDGs.
4.5 Therefore, new assistance initiatives must bring additional resources. Delivery of
pre-committed aid will not make a dent into the hardships experienced by the continent as
a result of the crisis. At least USD117 billion are needed to propel the continent on a
higher growth path to give it a chance to reach the MDGs.
5. Recommendations
5.1 Urgency of action: The severity of the crisis calls for swift action, with the sense of
urgency as demonstrated in the rapid setup and delivery of bailout plans for banks and
corporations in advanced economies.
5.2 Scaling up resources: The early initiatives to stem off the impact of the crisis have
typically involved a reallocation of existing resources. This is vastly inadequate to
address the impact of the crisis. Therefore, the following is recommended:
• New initiatives must involve “additionality” of aid over and above pre-committed
pledges. Donors should pledge to provide 0.7 percent of their domestic stimulus
packages to assist poorer countries, using existing multilateral channels.
• Donors must agree to increase the resource envelopes of the Bretton Woods
Institutions and major regional development banks to scale up support for countries.
Resources available to the IMF, and in particular through the ESF and PRGF, should
be increased.
• The IFIs have accepted that they must play a counter cyclical role. But they will need
the resources to do so. Shareholders must move quickly to increase the capital of
major regional banks to allow them to help fill the growing financing gaps faced by
member states. In particular we want to see an early review of capital adequacy of
the African Development Bank.
2 The study covered Benin, Burkina Faso, Cape Verde, Cameroon, Chad, Congo (RDC), Cote d'Ivoire,
Ethiopia, Ghana, Kenya, Madagascar, Malawi, Mali, Mozambique, Namibia, Niger, Nigeria, Rwanda,
Senegal, South Africa, Sudan, Tanzania, Uganda and Zambia.
- 9 -
• Shareholders and donors must quickly agree to streamline aid delivery processes in
BWIs and major regional banks to increase the speed and effectiveness of crisis
response initiatives.
• The Debt Sustainability Framework should be reviewed in the context of the crisis,
and the closure of access to credit. Those countries able to service the payments
should be permitted to access less or non concessional resources.
5.3 Increase and sustain investment in infrastructure at national and regional levels.
Africa already faces a fundamental infrastructure gap at both national and regional level.
Without filling that gap and promoting economic integration Africa will not be able to
benefit from the eventual global recovery. To achieve this goal:
• Donors must commit to increasing funding for public infrastructure in Africa.
• Fiscal/macroeconomic policy frameworks need to be more flexible to provide African
governments with adequate policy space for increasing budgetary allocations to
public infrastructure.
• The private sector must take a leading role in infrastructure investment and
management of infrastructure services, including through public-private partnerships.
• Governments must explore and encourage management arrangements that accelerate
cost recovery, including fee-for-service schemes in public goods.
5.4 Trade financing and trade facilitation must be at the center of the short-term and
long-term action plan. In particular, the following is needed:
• The G20 should resist taking protectionist measures in response to the crisis, and any
that are put in place must be strictly time limited.
• They should commit to an early conclusion of an ambitious and development oriented
Doha Round.
• Shareholders need to agree to increase financing capacity of the BWIs and regional
development banks to provide trade finance facilities.
• The G20 must provide technical, financial and political support to the Aid for Trade
Initiative.
• The donor community should establish a special Trade Facilitation Training Fund
(TFTF) for technical assistance to African countries to improve their preparedness for
trade negotiations.
5.5 Protecting the poor and the vulnerable: It is critical to preserve the modest gains in
poverty reduction and access to basic social services achieved before the crisis. In this
respect, donors and governments are called to:
• Maintain adequate levels of public spending on health, education (including special
programs such as school feeding programs), nutrition, and sanitation.
• Ensure adequate and stable funding for global initiatives such as the Global Fund for
the fight against HIV/AIDS, malaria, and tuberculosis, thereby avoiding large
numbers of preventable deaths.
• Provide financial support for social safety nets to protect the poor, the unemployed
and the socially marginalized. Such safety nets should be designed to allow easy
countercyclical adjustment to cushion the poor against the impact of shocks.
- 10 -
5.6 Increasing policy space and flexibility, speeding up aid delivery. In addition to
scaling up aid, donors need to support reforms in the aid delivery processes so as to:
• Increase flexibility and tailor aid allocations and delivery processes to recipient
country’s circumstances, including fragility, narrow fiscal space, and limited
technical and institutional capacity.
• Review the current performance based aid allocation models used to better reflect the
diversity of needs and circumstances, in particular the position of fragile states, and
the fundamental need to promote economic integration in Africa.
• Increase predictability of aid to facilitate planning and implementation of
development programs. Delivery should be frontloaded and more provided in fast
disbursing program rather than project support.
• Increase policy space by greater focus on results and less on prior conditionality, and
promoting country ownership of programs through greater participation of recipients
in dialogue and consultation.
5.7 The crisis provides an opportunity to improve global governance for more
transparency, accountability, and equitable representation. In particular:
• Africa and other developing regions must be given adequate voice and representation
in order to advance their development interests;
• Voting weights at the IFIs, which are currently based on shareholdings, must be
revisited to remove the bias in favor of rich countries and to recognize the importance
of the IFIs to achievement of the development plans of its members.
• Due attention should be given to the role of the regional institutions as representative
of their regional member countries.
5.8 The role of the state
• Advanced and emerging countries, as well as African countries are urged to
strengthen the regulation of financial systems to increase efficiency while minimizing
risk;
• Any efficiency gains from liberalization of financial systems and other markets must
be balanced against the social benefits of regulation in terms of financial stability and
equitable participation in the market economy;
• Donors and multilateral institutions must increase assistance for capacity building in
African countries, notably through targeted technical assistance programs.
5.9 Recovery of Africa’s stolen wealth: Billions of dollars of stolen wealth from the
continent, including funds smuggled through embezzlement of borrowed money, are
banked in Western financial institutions and tax havens. The ability of poorer countries to
develop a sound revenue base and provide basic services is thereby compromised. In
addition to enhanced action in Africa to counter corruption we recommend:
• Governments in advanced economies must enforce transparency in financial
transactions in their banking systems to stem off illegal transfers of funds from the
continent.
• The international community invests coordinated financial intelligence and resolute
political will, as it has in the war against terrorism, in the efforts to prevent the
smuggling of African assets, to track down and recover stolen wealth.
- 11 -
• In this respect, the G20 is urged to support the UN Stolen Assets Recovery initiative
and other similar initiatives aimed at preventing money laundering, tax evasion, and
capital flight.
5.10 Climate Change: The present financial crisis adds to the increasing burden in
Africa of coping with the changes brought about by global warming; again an external
shock not of Africa’s own making. It reduces resources for adaptation and mitigation
programs in African countries. It is critical that adequate new resources should be made
available to support adaptation and that these are additional to existing development
programs.
5.11 The political will of Africa’s development partners will be severely tested in these
moments of economic crisis. Advanced economies were able to mobilize massive
amounts of funds for fiscal stimulus and bailout packages to rescue banks and
corporations in the wake of the crisis. With much less resources than these rescue
packages, the donor community can preserve its credibility as a committed development
partner for Africa.
i
Figure 1: Financing Gaps vs. Aid Pledges for Africa
50
117
75.5
36
94
25
0
20
40
60
80
100
120
140
Maintain precrisis
growth*
Reach MDG
growth*
Infrastructure
gap
World Bank
(minimum)
World Bank
(maximum)
Gleneagles
pledges
USD Billion
ii
Table 1: Real GDP Growth (%): Data before and after Crisis
Real GDP growth GDP change
Before crisis After crisis After crisis
2008 (e) 2009 (p) 2008 (e) 2009 (p) 2008-2009
Algeria 4.8 4.8 3.3 0.2 -3.1
Angola 11.5 5.1 15.8 -7.2 -23.0
Benin 4.9 5.3 5.0 5.3 0.3
Botswana 5.3 5.2 3.9 2.6 -1.3
Burkina Faso 4.7 5.8 4.2 6.0 1.8
Burundi 5.8 5.6 3.2 2.9 -0.3
Cameroon 4.8 4.6 4.1 3.1 -1.0
Cape Verde 7.6 7.0 6.1 3.6 -2.5
Central African Rep. 4.0 4.5 2.6 3.2 0.7
Chad 3.2 -0.7 0.2 -0.7 -0.9
Comoros 4.5 4.5 0.5 0.8 0.3
Congo, Republic of 6.4 6.4 7.0 7.7 0.8
Congo, Dem. Rep. of 6.6 7.1 5.7 -0.6 -6.3
Côte d'Ivoire 2.8 3.8 2.3 3.8 1.5
Djibouti 5.6 5.6 5.9 6.5 0.6
Egypt 6.8 6.7 7.2 4.3 -2.9
Equatorial Guinea 5.8 4.1 9.9 3.7 -6.2
Eritrea 1.3 1.1 1.2 1.6 0.4
Ethiopia 7.5 7.4 11.6 6.5 -5.1
Gabon 4.2 4.1 5.5 4.0 -1.5
Gambia, The 6.0 6.0 5.7 5.0 -0.7
Ghana 6.0 6.3 6.4 5.8 -0.6
Guinea 5.0 5.0 4.7 3.8 -1.0
Guinea-Bissau 2.1 2.2 3.2 3.1 -0.1
Kenya 4.0 6.5 2.6 5.0 2.4
Lesotho 5.2 5.4 4.2 3.8 -0.3
Liberia 9.2 11.0 7.3 10.8 3.5
Libya 8.0 7.8 6.5 3.4 -3.1
Madagascar 6.5 6.7 7.0 4.8 -2.2
Malawi 5.1 5.5 8.4 6.5 -1.9
Mali 4.7 4.8 3.6 4.2 0.6
Mauritania 5.0 5.0 5.2 3.4 -1.8
Mauritius 5.0 4.9 4.8 3.0 -1.8
iii
Morocco 6.0 6.1 5.7 5.4 -0.2
Mozambique 7.0 6.8 6.2 4.0 -2.2
Namibia 4.4 3.3 3.4 2.7 -0.7
Niger 4.7 4.5 4.8 1.8 -3.0
Nigeria 6.2 6.1 6.1 4.0 -2.2
Rwanda 4.0 5.6 8.5 6.6 -1.9
São Tomé & PrÃncipe 6.0 6.0 5.8 6 0.2
Senegal 4.9 4.6 3.7 3.5 -0.2
Seychelles 5.9 4.2 1.5 -0.4 -1.9
Sierra Leone 6.5 6.5 5.4 6.3 0.9
Somalia … … … … …
South Africa 4.0 4.9 3.1 1.1 -2.0
Sudan 10.7 11.0 8.4 5.0 -3.4
Swaziland 1.0 1.0 2.6 2.5 -0.2
Tanzania 6.5 6.7 6.8 6.1 -0.7
Togo 3.5 3.9 0.8 3.9 3.1
Tunisia 5.5 5.6 5.1 4.1 -1.0
Uganda 6.2 6.3 7.0 5.6 -1.3
Zambia 6.3 6.4 5.5 2.8 -2.7
Zimbabwe -4.5 -4.0 -5.2 -5.6 -0.4
AFRICA 5.9 5.9 5.7 2.8 -2.9
Source: AEO 2009 Projections. World economic outlook Database, October 2008 and FAO
Note: (p) Projections; (e) Estimation
iv
Table 2: Export revenues and Current Account Balance: Data before and after Crisis
Exports of Goods
( US$ Billion)
Current Account Balance
(As % of GDP)
Before crisis After Crisis Estimated
Shortfall
Before crisis After Crisis
2009(p) 2010(p) 2009(p) 2010(p) 2009(p) 2010(p) 2009(p) 2010(p) 2009(p) 2010(p)
Algeria 84.42 86.35 43.62 46.87 40.79 39.48 19.84 18.01 5.60 7.00
Angola 78.63 90.52 40.43 45.91 38.19 44.61 15.91 16.44 -8.13 -7.00
Benin 0.45 0.51 0.33 0.34 0.12 0.17 -8.14 -6.86 -7.82 -8.32
Botswana 5.31 5.45 4.77 4.77 0.54 0.68 7.61 6.34 11.54 10.14
Burkina Faso 0.90 1.03 0.74 0.78 0.17 0.25 -12.13 -10.23 -8.69 -8.96
Burundi 0.06 0.07 0.06 0.06 0.01 0.01 -14.83 -13.27 -8.36 -12.38
Cameroon 4.75 4.60 4.09 4.35 0.66 0.25 -1.10 -2.40 0.22 0.24
Cape Verde 0.12 0.12 0.08 0.08 0.04 0.04 -10.87 -10.73 -9.62 -6.63
Central African
Rep.
0.24 0.26 0.15 0.15 0.10 0.11 -5.91 -5.62 -7.38 -8.09
Chad 4.53 4.38 2.00 2.24 2.54 2.13 -1.84 0.89 -3.75 1.44
Comoros … … … … … … -9.55 -9.12 -9.55 -9.12
Congo, Dem.
Rep. of
7.23 9.26 4.33 4.76 2.91 4.51 -12.58 -5.29 -27.40 -22.59
Congo, Republic
of
14.57 16.69 7.28 8.10 7.30 8.59 21.41 25.27 -2.95 -2.24
Côte d'Ivoire 11.45 12.16 7.85 8.38 3.60 3.78 -0.58 -0.95 -0.33 -1.33
Djibouti 0.11 0.13 0.09 0.09 0.02 0.04 -32.86 -27.50 -20.69 -19.23
Egypt 35.03 37.90 24.36 25.21 10.68 12.69 -0.86 -1.67 -1.24 -1.78
Equatorial
Guinea
15.22 14.77 7.71 8.57 7.51 6.21 2.78 0.87 -0.03 1.06
Eritrea 0.03 0.12 … … … … -2.15 -0.27 -2.15 -0.27
Ethiopia 1.68 1.78 1.22 1.37 0.46 0.41 -5.25 -4.73 -5.04 -3.74
Gabon 11.19 11.14 6.49 7.11 4.71 4.02 18.09 16.02 -3.54 3.36
Gambia, The 0.11 0.11 0.07 0.08 0.03 0.04 -12.50 -11.98 -8.84 -9.96
Ghana 5.66 5.92 4.72 4.84 0.94 1.08 -13.17 -12.68 -13.15 -17.86
Guinea 1.63 1.78 1.18 1.27 0.45 0.51 -6.73 -5.51 -1.63 -1.20
Guinea-Bissau 0.12 0.13 … … … … -11.56 -10.55 -11.56 -10.55
Kenya 5.64 6.32 5.03 5.08 0.61 1.25 -4.49 -4.85 -0.39 0.08
Lesotho 0.91 1.04 0.69 0.75 0.22 0.28 -1.41 -2.86 8.94 1.39
Liberia 0.73 1.18 0.37 0.41 0.36 0.77 -43.91 -29.27 -5.70 6.98
Libya 67.90 78.13 30.80 34.30 37.10 43.83 29.45 28.33 3.31 6.52
Madagascar 1.78 2.87 1.05 1.24 0.73 1.63 -21.15 -9.68 -21.03 -22.90
Malawi 1.00 1.11 0.69 0.72 0.31 0.39 -5.40 -6.42 -2.82 -5.88
Mali 1.76 1.78 1.81 1.73 -0.06 0.05 -6.92 -6.59 -0.95 -3.67
Mauritania 2.17 2.08 1.50 1.49 0.66 0.59 -2.97 -11.23 -13.18 -14.52
Mauritius 2.72 2.85 2.30 2.38 0.42 0.48 -6.58 -5.72 -6.14 -6.37
v
Morocco 21.52 22.71 17.11 19.13 4.41 3.58 -0.34 -0.79 -1.97 -3.15
Mozambique 2.93 3.05 2.39 2.94 0.55 0.11 -13.27 -13.05 -14.02 -11.22
Namibia 3.58 3.65 2.32 2.49 1.25 1.16 12.41 10.20 2.69 1.42
Niger 1.03 1.19 0.54 0.58 0.49 0.61 -20.56 -22.52 -15.40 -16.30
Nigeria 89.08 99.47 50.40 55.31 38.68 44.16 0.61 -0.50 -9.05 -6.44
Rwanda 0.26 0.29 0.22 0.25 0.05 0.04 -12.43 -11.47 -5.87 -6.23
São Tomé &
PrÃncipe
0.00 0.00 0.00 0.00 0.00 0.00 -34.49 -33.44 -34.49 -33.44
Senegal 2.83 2.97 1.67 1.71 1.17 1.26 -11.44 -12.10 -8.72 -9.76
Seychelles 0.41 0.42 0.39 0.40 0.02 0.02 -35.11 -38.40 -21.54 -20.03
Sierra Leone 0.40 0.45 0.44 0.48 -0.04 -0.03 -4.18 -4.29 -4.37 -4.55
Somalia … … … … … … … … … …
South Africa 96.12 101.82 68.25 70.84 27.87 30.98 -8.15 -8.33 -6.36 -7.64
Sudan 13.15 15.23 7.64 8.82 5.51 6.41 -6.73 -6.80 -13.83 -15.86
Swaziland 1.74 1.80 1.53 1.64 0.21 0.17 -2.02 -2.64 15.38 7.94
Tanzania 2.77 3.10 2.21 2.23 0.56 0.87 -9.97 -9.74 -9.69 -10.43
Togo 0.96 1.05 0.77 0.80 0.20 0.25 -8.48 -7.13 -1.08 -2.19
Tunisia 22.02 24.55 16.99 18.60 5.03 5.95 -3.46 -3.29 -3.23 -2.53
Uganda 1.91 2.05 1.79 1.82 0.13 0.23 -5.83 -6.17 -7.30 -8.90
Zambia 5.76 5.62 2.73 3.00 3.04 2.62 -6.60 -7.00 -17.01 -17.28
Zimbabwe … … … … … … … … … …
AFRICA 634.56 691.95 383.17 414.45 251.24 277.25 1.90 1.56 -4.37 -4.12
Source: AEO 2009 Projections. World economic outlook Database, October 2008;
Notes: Data for Zimbabwe, Somalia, Sao Tome, Guinea Bissau, Eritrea and Comoros are not available.
Negative shortfall implies a surplus position. (p) Projections
vi
Table 3: Selected projects expected to be cancelled or postponed
Country Detail on project
Algeria In December 2008 the Government postponed the date of submission of tenders for the modernization of
Skikda and El Harrach refineries to 1Q 2009. These projects could be delayed.
Botswana A US$ 6 billion coal fired power project delayed.
Burkina Faso Out of six mines scheduled to start in 2009, three mining companies are having difficulties mobilizing funds
needed to begin operations.
Ethiopia Non-sovereign financing of a large hydropower project of EUR 1.5 billion is lagging. A private investment
bank had earlier expressed interest but has withdrawn due to the crisis impacting its appetite for emerging
markets.
Ghana Attempted sale of Volta Aluminum Company Limited (VALCO), an aluminum smelter, collapsed due to
withdrawal of the Brazilian consortium from the deal
Guinea Investments delayed in mining projects
- A renewable energy project Kenya for 300MW delayed
- A Toll Road in Kenya of a total cost of around US$800 million delayed.
Senegal - A Toll Road delayed
- A new greenfield airport of EUR 400 million cost delayed.
Sierra Leone Construction projects may be delayed
Sudan Petronas decided to put its Port Sudan refinery project on hold.
Tanzania Rio Tinto and Vodacom have postponed investments in mining projects
Tunisia Gasfield development project being restructured (total project cost is US$1.2 billion)
Transshipment deep sea port project likely to be delayed
Uganda 14 medium scale companies closed in 2008 and 15 more expected to close in 1Q 2009, Government will
divert money from planned road projects to other sectors.
West Africa(regional
project)
A telecommunication project in West Africa for US$240m: One of the potential shareholders may withdraw
and cost of commercial debt has increased sharply.
Vii
Table 4: Crisis mitigation strategies in selected countries
Countries Mitigating Measures by Government
Botswana
• The Central Bank cut its rate by 50 basis points to 15% in December 2008.
• In the face of uncertainty as to the duration of the global economic slowdown, the cushion provided by the foreign exchange reserves may not be
sufficient; some increase in borrowing is expected.
• Reductions in spending targeting not only the development budget, but also some recurrent expenditure items, such as personnel emoluments and
the cost of travel.
Cape Verde
• Dialogue with the IMF which adjusted the criteria of performance of the PSI
• Careful management of the interest rates and the budget
• Development of the Treasury bills to encourage the saving to remain in the national financial system.
Egypt • Ministry of Trade & Industry EGP7 billion to boost exports and local production
• Crisis package for tourism sector, including tax-exemption for charter flights, offering of free nights in hotels, etc.
• Establishing deposit insurance fund (to boost confidence in banking sector)
• Parliament approved legislation on integrated supervision of non-bank financial sector (i.e., capital market, insurance, mortgage finance, financial
leasing, and factoring) in January 2009
• 2nd phase of the Financial Sector Reform Program, with expected joint ABD-World Bank financing, discussed between the Prime Minister, the
Minister of Investment, and the Governor of the Central Bank in January 2009. Program at strengthening role of the financial sector by
expanding the volume of bank lending, and enhancing SME’s access to credit.
• Egyptian Central Bank cut its benchmark interest rate for the first time since April 2006. The overnight deposit rate was lowered by 100 basis
points to 10.5%, while the lending rate was cut by the same amount to 12.5%.
Kenya • The Central Bank reduced the threshold for investments in Treasury Bills in the primary market from the current Kshs 1 million to Kshs 0.1
million from January 2009 to induce small investors.
• The Kenyan government issued infrastructure bond that amounted to 18.5 billion shilling (USD 232.6 million) with 12-year maturity in February
2009.
Mauritius • Government announced in January 2009 a stimulus package to bolster economic growth, increase jobs and boost purchasing power as a response
to the global financial crisis. The package will provide Mauritian Rupees 10.4 billion, equivalent to about 3% of GDP.
Morocco • In a bid to stimulate trade, the Moroccan government has taken a series of measures to re-energize the markets:
• Allowing companies to buy back their own shares without a minimum set price in the event that their share prices drop below a certain level.
• The possibility for insurance companies to hold up to 60% of their listed shares to cover their liabilities, as opposed to the previous ceiling 50%.
Nigeria
• The 2.8 trillion naira (22.6 billion dollar) 2009 budget submitted to the National Assembly is noticeably heavy on recurrent expenditure and light
on capital spending and investment. The government is now mulling to use its USD 52 billion foreign exchange reserves to shore up the
economy through a stimulus package.
• Launch of a Presidential Steering Committee on the Global Economic Crisis in January 2009. The Committee is responsible for developing a
framework to respond to the global crisis.
• Government announced plan to suspend the 5% excise duty on some goods manufactured such as juices, instant noodles and non-alcoholic drinks,
aiming to support its stressed industry and avert job losses.
• Government decided to inject N70 billion into the textile industry through guarantees in February 2009.
• Nigerian government imposed foreign exchange controls to stem off the slide in the Naira. These measures include:
viii
• All foreign exchange purchases from the central bank window are only to be used for customers, and not on the interbank foreign exchange
market.
• The net open foreign exchange position of banks reduced to 1% of shareholders’ funds, down from 20% in mid-December 2008.
South-Africa The recent Presidential State of the Nation address (6th February, 2009) has taken note of the impact of the ongoing financial crisis to the economy.
The government has flagged measures underway to avert the crisis that include:
• Increased funding for public investment projects with allocation of R 690 billion (about USD 80 billion) over the next three years;
• Intensification of public sector employment programs;
• Adoption of industrial financing and incentive instruments to assist firms in distress, and lastly;
• Sustained and expansion of government social expenditure.
• Financing of these measures includes support from development finance institutions as well as partnership with the private sector
• Proposed tax adjustments to personal income tax providing middle and lower income earners with R13.6 billion in tax relief.
• The South African Reserve Bank cut the repurchase rate, its benchmark interest rate, by 100 basis points to 10.5%, the biggest reduction in more
than five years.
Sudan • The Regional Government of Southern Sudan has ordered a 10% salary cut for all senior government officials and a clampdown on the payment
of hotel costs for officials who do not have their own housing.
Tunisia • A Commission to ensure crisis surveillance has been established
• 2009 budget includes a significant increase in public investments along with measures to increase external competitiveness and employment and
strengthen social protection
• Central Bank relaxing monetary policy stance, with Dinar money market rate falling from about 5.2% in December to 4.65% in January 2009
• Central Bank reduced its key interest rate by 75 basis points, from 5.25% to 4.50% in February 2009.
Uganda • Government has assisted the troubled Uganda Transport Operators and Drivers Association (Utoda) by writing off nearly half of the accumulated
Shs1.7 billion debt that it owes Kampala City Council (KCC).
ix
Appendix Table A1:
Africa’s Infrastructure lags other developing countries and gap widening over time
Normalized
units*
Sub-
Saharan
Africa
LICs
Other
lowincome
countries
Sub-
Saharan
Africa
MICs
Other
middle
income
countries
Paved road
density
31 134 94 141
Total road density 137 211 215 343
Mainline density 10 78 106 131
Mobile density 55 76 201 298
Internet density 2 3 5 8
Generation
capacity
37 326 256 434
Electricity
coverage
16 41 35 80
Improved water 60 72 75 86
Improved
sanitation
34 51 48 74
Source: Source: Preliminary results AICD 2008
* Units: Road density is in kilometers per kilometer squared; telephone density is in lines per thousand population; generation capacity
is in megawatts per million population; electricity, water and sanitation coverage are in percentage of population.
x
Appendix Figure A1:
Sub-Saharan Africa is lagging behind in infrastructure
SSA = Sub-Saharan Africa
Note: SSA = Sub-Saharan Africa
Source: Preliminary results AICD 2008
Impact of the crisis on African economies – Sustaining growth and poverty reduction
African Perspectives and Recommendations to the G20
A report from the Committee of African Finance Ministers and Central Bank Governors established to monitor the crisis. March 17, 2009
Download PDF of full document (225KB)
Executive Summary
Although most African countries are not on track to meet the Millennium Development Goals, Africa had made steady progress over the last decade, building the foundations for higher growth and poverty reduction. This more optimistic picture is now being undermined by factors outside its control. While the initial effects of the financial crisis were slow to materialize in Africa, the impact is now becoming clear. It is sweeping away firms, mines, jobs, revenues, and livelihoods; it is in short a full blown development crisis. For the first time in a decade there will be zero growth per capita. This note provides evidence of the effects, and suggests action needed. For Africa no less than elsewhere time is of essence; decisive remedial action is needed now.
The growth outlook has deteriorated severely. Macroeconomic balances have worsened, with many countries facing widening current account and budget deficits. The crisis is reducing trade, the mainstay of recent strong growth in Africa. The expected shortfall in export revenues amounts to USD251 billion in 2009 and USD277 billion in 2010 for the continent as whole, with oil exporters suffering the largest losses.
In addition to exports, capital inflows are also declining, including worker remittances and tourism receipts. The stocks of foreign reserves are running dangerously low, with some countries down to only a few weeks of import cover (for example, the DRC). This severely jeopardizes the capacity to import even basic commodities such as food, medical supplies, and agricultural inputs. The poor are the most affected. The private sector has been affected by shortage of liquidity in international markets, with adverse impact on trade and investment. International banks have failed to issue lines of credit or even confirm pre-committed ones. Projects have been delayed, and some have already been cancelled.
African governments have undertaken measures to minimize the impacts of the crisis. These include: setting up special monitoring units, providing fiscal stimulus packages, revising budget expenditures, targeting assistance on key sectors, strengthening the regulation of the banking sector and markets, expansionary monetary policy, and foreign exchange controls to protect the exchange rate. The key concern is the deceleration of growth, which will disproportionately affect the poor. It is critically important to preserve the foundations of growth erected through steady policy reforms and improvements in the investment climate; this will allow the continent to resume growth after the crisis.
To achieve this goal, it is critical to sustain adequate levels of investment, especially in infrastructure. However, Africa’s ability to do so is severely limited. Pre-existing resource constraints are being exacerbated by a widening saving-investment gap. We estimate that just to sustain pre-crisis levels of growth in Africa would require an additional $50bn in 2009 and $56bn in 2010. Increasing investment to the level needed to achieve higher, MDGs-consistent, growth rates, would require an additional $117bn in 2009 and $130 billion in 2010.
Previous, repeated, commitments to increase aid to Africa must be delivered quickly: speed of access is vital. But that alone will not be enough if Africa is to be able to restore a level of growth sufficient to reduce the levels of poverty. New and additional resources must be unlocked. Africa must be part of the global response to the crisis.
Our key recommendations to the G20 are:
Demonstrate political will and take action now
The severity of the crisis calls for the same sense of urgency as shown in rescue plans for banks and corporations in advanced economies.
Delivering quickly on existing commitments is key to donors’ credibility as committed development partners for the continent.
Protect the poor and the vulnerable by ensuring essential public investment programmes in health, education, nutrition, and sanitation can be maintained.
Support social safety nets to protect the poor, the unemployed and the socially marginalized.
Provide additional resources
Commit 0.7% of developed economies own stimulus packages to assist poorer countries, ensuring new initiative are truly additional to existing aid plans.
Augmenting the concessional resources available to the IMF and ease access.
Increase and sustain investment in infrastructure at national and regional level: stimulus packages must primarily target infrastructure projects.
Increase the resource envelope for regional development banks; in particular agree on an early review of capital adequacy of the African Development Bank.
Increase trade financing by injecting new resources for specialized facilities, including through regional development banks.
Increase policy space and flexibility, and reduce conditionality
Focusing on results, rather than prescribing rigid policies and actions, allowing countries space to respond according to their particular needs and circumstances.
Provide more predictable flows of aid, with more fast disbursing and front loaded assistance, consistent with African priorities.
Increase flexibility in macroeconomic frameworks to allow more scope to balance macroeconomic stability and the need to stimulate domestic demand.
Review debt sustainability criteria reviewed to allow access to credit to countries with adequate potential to borrow.
Reform procedures in order to promote more rapid and less conditional delivery.
Promote trade
Conclude an ambitious and development focused Doha Round, provide Aid for Trade, and technical assistance
Increase transparency, accountability, and equitable representation
Provide adequate voice and voting rights to African countries in IFIs and major global governing bodies
Tackle tax havens and assist in the recovery of Africa’s stolen wealth; enforce transparency in financial transactions in banking systems in advanced economies to deter illegal transfers of funds from African countries.
Belai Habte-Jesus, MD, MPH
Global Strategic Enterprises, Inc. 4 Peace & Prosperity
Win-win synergestic Partnership 4P&P-focusing on
5Es: Education+Energy+Ecology+Economy+Enterprises
www.Globalbelai4u.blogspot.com; Globalbelai@yahoo.com
V: 571.225.5736; C: 703.933.8737; F: 703.531.0545
Our Passion is to reach our Individual and Collective Potential
--------------------------------------------------------------------------------
From: Belai FM Habte-Jesus
To: EPRDF-Supporters-Forum@yahoogroups.com; Dawit Yohannis
Cc: Addis-Ababa-university-alumni-owner@yahoogroups.com; Asratie Teferra
Sent: Thursday, April 2, 2009 11:59:20 AM
Subject: Re: [EPRDF-Supporters-Forum] Coffee hoarding in Ethiopia
Dear Patriotic Global Citizens and Friends of Ethiopia and Africa:
I read with interest the Stimulus Package that included regulating the coffee trade with transparency and accountability benchmark that the Ethiopian Government Awarded the Coffee Traders in Addis especially the Bernie Madoff and Ponzi Operators of the business.
I believe Good Govrenance should start with the business community and the Coffee traders will be an excellent pilot project to ensure the Commodity Market includes them.
What ever you do please do not equate the Rent Seeking Coffee Delalas with Free Market as the story is quite different. They are more like Tamirat Geleta the Kalicha who is defrauding the Addis Community.
Transparency and Accountability is a sign of Good Governance, I for one support the Ethiopian Government Stimulus and Recovery Package. I would like them to include the Municipality and Government officials who are so corrupt that they hand out the same plot of land to 4 to 5 investors at the same time.
We need the Renaissance package to inlcude all aspects of productivity from private to the public including Government offfices top to bottom.
I am sure PM Meles will bring good news to the NEPAD team on how to come out of Global Economic Crisis.
The Coffee Business is just a pilot we need to spread it out to every corner of life where productivity, performance and transparency should be the benchmark.
My suggestion is to follow the proven Good Governance standards. Do they qualify for SMART businesss stnadards., that is are they Specific, Measurable, Appropriate, Realistic and Time Sensitive.
Do they qualify for Result Oriented Performance Measures based on the following values:
Do they follow the 3As, 3Es and FoC value system.... that is are they accessible, affordable, accountable?
Are they Efficient, Effective and Equitable and most importantly do they offer
FoC: Freedom of Choice.
By all these Good Governance Standards, the Coffee horders will score 0 and they need to be considered Toxic Assets and taken over by the Government.
We need more action in the public and private sectors in further depth.
That is the role of the Renaissance NEPAD.
Dr B
Belai Habte-Jesus, MD, MPH
Global Strategic Enterprises, Inc. 4 Peace & Prosperity
Win-win synergestic Partnership 4P&P-focusing on
5Es: Education+Energy+Ecology+Economy+Enterprises
www.Globalbelai4u.blogspot.com; Globalbelai@yahoo.com
V: 571.225.5736; C: 703.933.8737; F: 703.531.0545
Our Passion is to reach our Individual and Collective Potential
--------------------------------------------------------------------------------
From: Abera Atsbeha
To: EPRDF-Supporters-Forum@yahoogroups.com
Sent: Thursday, April 2, 2009 11:06:37 AM
Subject: Re: [EPRDF-Supporters-Forum] Coffee hoarding in Ethiopia
Hello Mezgebe
I have come across this news story before but did not give it any importance beyond being a mere news item. Your question prompted me to look at it one more time, with the legal and political implications in mind.
I have considered myself a free trade and free market advocate, whatever that may mean. My advocacy has been somewhat tempered, however by the economic mess the world is currently in, which I believe is mainly due to unregulated, laissez-faire market conditions.Although still am not a fully sold to the idea of state tampering with the market, I am willing to entertain the idea that it may not be bad at all, if done selectively and in moderation. My opinion on the issue in question is therefore tainted by this new change of mind.
The Government has taken this action on some business it believes are hoarding coffee. Two reasons are mentioned as motivating these businessmen to hoard coffee.
1. The first is an expected rise in the price of coffee: This may not seem that bad at first glance. After all it is both the state and
the exporter that will benefit as the state gets more foreign currency and the exporter more birr as a result.
The question is will the price go up ? even if it does can the country afford to wait for the market to go up while under an
acute hard currency shortage ? Is the anticipated gain enough to compensate for the benefits lost or differed due to delayed
purchases or abandoned projects due to shortage of convertible currency ? The Government is spending US$300,000.00 to
acquire wheat to alleviate food shortage in cities. The cost of delaying this can only be measured in terms of human lives.
Exporter may gain as a result of the hoarding but the country will definitely lose. The governments main duty is to protect
the interest of the country and even when it seems to be in conflict with individual interest.
2. The Second is an expected devaluation of the Birr. In this instance nobody gains but the exporter. The exporters may even
be trying to force the government to devalue by exacerbating the convertible currency problem. I don't think any sane
government will allow that to happen. Few people at the end of the chain in the coffee production and trade field and for that
matter anyone outside the competent body in the government should not be allowed to to influence the economic viability of
the country.
In view of the above, I believe the government is legally bound to take the action it took. In addition, because the economic policy of EPRDF is based on the Developmental State Model that believes in the State having a hand in guiding the economy, the government is in line with its stated policy to take this action.
While I am at it, I would like to ask a question which I think is related to the topic under discussion. It has been nearly a year now since Ethiopia established Commodit y Exchange. It appears there are some within the Agricultural Output Marketing community who are not happy with the system. Can anyone educate us how the systems works, its good and bad sides and why some in the business community may not like it. That could help.
Thanks and Best Regards
Abera
On Tue, Mar 31, 2009 at 2:10 PM, Mezgebe Gebrekiristos Gebrekiristos
Hello everyone,
What do you think of the coffee exporters' action in Ethiopia and the government's subsequent reaction? In other words, does the punishment fit the crime?
Thanks,
Mezgebe
The Government Is Intolerant To Export Distorting
Tactics
Office for Government Communication Affairs of the Federal
Democratic Republic of Ethiopia (FDRE)
Press Release
March 30, 2009
The Government of the Federal Democratic Republic of Ethiopia (F.D.R.E) has
been striving to stimulate the export sector through various means. It has laid a
system where in exporters are enjoying a wide range of incentives and supports
from the government.
Given the role coffee plays in Ethiopia’s economy and the lion’s share it has in
the export sector, the Government has been implementing a recently endorsed
proclamation and order that have created a conducive environment of controlling
the quality of coffee and sustaining a viable marketing system so as to put the
country’s export in a competitive edge at the global market.
In spite of the new impetus, the country’s performance in the coffee export as of
last September has been low, leading to a decline in its foreign currency
earnings.
Having realized the real causes behind the problem, the government had tried to
address it on time. Senior government officials, including His Excellency Prime
Minister Meles Zenawi, had advised coffee traders on several occasions that
they should sell their commodity on the existing global and local market situation
in stead of stockpiling Ethiopia’s number one export commodity in their
warehouses. But all those efforts were not taken into account by the coffee
hoarders.
The illegal activities of some of the traders did not only put pressure on the
country’s foreign currency reserves but also on the local market where they
failed to supply the bi-products of the export commodity creating another
loophole to illegal coffee trading in the local market.
In short, some of the exporters who were supposed to export coffee which they
bought last harvesting season were found to have been hoarding a large volume
of coffee; failed to supply the local market with coffee; concealed high amount of
exportable commodity, they had bought last season, from legal inventory
process; even, without informing the Ethiopian Commercial Bank and providing
any sound reasons, cancelled their consignment which they had pledged to
foreign importers.
Thus, the Ministry of Agriculture and Rural Development has taken appropriate
measures against illegal coffee hoarders in line with the mandate entrusted to it
by proclamation number 602/2000. Hence, the coffee export accreditation
licenses of six coffee exporters been withheld; their coffee export licenses were
evoked by Ministry of Trade and Industry; and their stockpiles of export-grade
coffee and its bi-products stored in their warehouses were sealed.
Similar actions have also been taken against 88 coffee suppliers who had been
found hoarding coffee that should have been sold last season through the
Ethiopian Export Commodity Exchange (ECX). The measures show how the
Government of F.D.R.E is intolerant to market distorting tactics employed by
suppliers and exporters.
The Government of F.D.R.E believes that the measures taken against those
illegal coffee exporters and suppliers set a good example to other business
persons in the same sector.
The coffee traders are expected to refrain from such illegal activities lest they
would face similar tough measures. That is because the Government is dutybound
to maintain law and order in the free-market economy.
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