Africa should prepare for effects of credit crunch

By Samson Ntale in Uganda

Africa is not immune from international financial turmoil, and must begin to prepare for the adverse effects yet to unfold, economists have said.
Economists say the actual impact is yet to be felt, at least in six months time. Louise Kasekende, Chief Economist Africa Development Bank says the continent will suffer a slowed growth rate in the next two years and would be unable to meet the Millennium Development Goals (MDGs). "The crisis is still unfolding and it may be difficult to assess it. But it is prudent to tackle it as it unfolds till it fades out. That is when proper lesson will be drawn," Kasekede told the Standard in interview on the fringes of a one-day Africa Commission conference on the theme ‘Creating Economic Growth for Africa’, last week.

"With slowed growth rate down to five per cent from the projected eight per cent, Africa is unable to meet the MDGs.

Most predictions including the International Monetary Fund, are giving six months for Africa to start feeling the adverse effects of the credit crunch that hit many western economies.

"In the context of globalisation, African economies are not immune from effects of the credit crunch and must prepare for hard times," said Kasekende. Africa needs to start finding instruments to deal with the challenges of reduced capital inflow from outside the continent and reduced economic activity.

"Because donor countries have spent a lot on bailout to aid their collapsing banks, they will be unable to meet their aid obligations to Africa. Aid budgets will be tightened and there will be a slow disbursement." he said.

He said African countries implementing strict reforms in their financial sector will not suffer much. These are likely to be middle-income countries like South Africa, Egypt and Nigeria.

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