That Finance Ministers Summit And African Economy:  Matters Arising

By

Prince Ikeokwu

princenwaoku@yahoo.com

Standing from a vantage point on the global economy, it becomes lucid that Nigeria as well as other African countries is standing on the brink of harsh economic realities, grappling with developmental challenges of reformatting their economies to meet the 2015 MDG target and the Vision 2020.         

It is quite interesting to note that the meeting of the Committee of Ten African Finance Ministers and Regional Central Bank Governors (C10), in Abuja, has just ended, but the memories of this strategic gathering of intellectuals has continued to resonate, especially as it deliberated on ways to shield African economies from speedy recovery as well as having a major stake in the world decision making.

The Nigeria’s Finance Minister and the chair of the gathering, Dr. Mansur Muhtar said it was “an opportune moment for the C10 to continue to engender policy initiative that will propel African countries on the recovery path, as well as make a strong case for increased concessional finance that will support economic recovery on the continent, ahead of the G-20 Meeting coming up in Pittsburgh in September, 2009”.

No doubt, the corollary of the global financial and economies crisis had cut across Africa, and its effects continued to spread and deepen, thereby declining the growth of African economies as fast as possible. The hard-won reforms, in terms of macro economies stability; debt management and improved investment climate are now at great risk.

It is obvious that while some develop countries of the world has the capacity for counter-cyclical spending, most lack the resources to mount a substantial fiscal response, and will instead experience an erosion of their fiscal space as revenue fall, borrowing costs increase and transfer to maintain social safety nets surge.

 Middle-income countries and large open economies in general were the first to be hit by the crisis, with substantial losses on their equity markets. While countries that are most dependants on natural resources have suffered larger growth acceleration and bigger losses in trade revenue and fiscal balance.

The G20 countries had agreed to a plan of recovery of unprecedented scale, making ambitions commitments to take actions to restore the flow of credit through the scaling up of resources of the IMF and the World Bank. These global pledges in response to the crisis is a step in the right direction, but inadequate for Africa.

This is based on the fact that Low-income countries are not eligible for the bulk of the resources, which are inform of loans for Middle-income countries. The major concern here is the risk of debt building up, which would undermine their growth prospects and ability to take advantage of global recovery.

However, as the developing nations await these global initiatives, with hope that it will translate into resources that can be utilized for both supporting, and crisis preventing programme, analyst have persistently questioned the grit and political will of the African Finance Ministers and the Regional Central Bank Governors to engage in critical self-appraisal and pursue bold policies that will radically transform their economies, considering the African divergent political and economic terrain.

Moreover, given that the resources available to the IMF are mostly short-term, these cannot be relied upon to meet African countries’ need for long term financing, especially mechanisms which limit responsiveness and adaptation to country specific circumstances.

It is clear that more needs to be done to meet the financing needs of African countries in the context of the crisis. In particular, it is critical to increase the pool of concessional resources and grants for low income countries.

To improve crisis response effectiveness, it is advisable for the IMF to channel its recent approved short-term resources into long-term development financing, mainly through regional and multilateral development Banks. It is also important to ensure a speedy review of our debt sustainability framework.

A comprehensive response to the crisis will require coordination of actions by African governments and those of their development counterparts to maximize effectiveness.

For us to get out of the wood, there is need to focus on; striking a balance between crisis response and alleviation of structural constraints to long term growth; rebalancing between external and domestic resources of growth; accord priority to infrastructure, trade logistic; regional integration and accelerate institutional reforms.

On the policy front, it is imperative for Africa to be engaged in global debate. This is significant to ensure that the continent is effectively represented in key global institutions such as the IMF and the World Bank, which is among the priorities of the C10 summit.

To be precise, since the expectations of Africans in the next G20 summit, among others are; the implementation of commitments made in London; increase resources to IMF, issuance of special drawing rights to enable countries have more access to their resources, we cannot afford to toy with this gathering at this point in time.

Let us give maximum cooperation to this forum.  It is high time we took charge of activities and situation in our domain, initiate ideas to solve our problems, because our destiny lies in our own hands.

Prince Ikeokwu writes from the Press Unit,

Federal Ministry of Finance, Abuja.