Special Report:Global Financial Crisis
by Xinhua Writers Gu Zhenqiu, Chen Gang
WASHINGTON, April 25 (Xinhua) -- African countries are mostly victims of
the worst economic downturn since the Great Depression in the 1930s, and the
developed countries, which are responsible for the current global financial
crisis, should take necessary steps to make the crisis duration as short as
possible, several African finance ministers said here on Saturday.
The ministers from Cote d'Ivoire, Tanzania and Zambia made the appeals at a
joint press conference here, held on the sidelines of the two-day spring
sessions of the World Bank and the International Monetary Fund (IMF).
The meetings kicked off on Saturday and drew finance ministers and central
bank governors from all over the world to discuss how to better combat the
current global financial crisis.
"The financial crisis did not start from Africa, it started from here,"
Situmbeko Musokotwane, the Zambian minister of finance, told the press
conference, referring to the United States, origin of the six-month-old
financial crisis, which has since spread across the globe.
The Zambian minister's statement won immediate endorsement from Charles
Koffy Diby, the finance minister of Cote d'Ivoire, who said, "The crisis didn't
come from us. We are victims. The crisis created a drain on our resources."
Therefore, "we urge the rich countries to take the necessary steps to make
sure that the financial crisis will be as short as possible," the Zambian
minister said.
FINANCIAL CRISIS FELT IN AFRICA
The crisis is now in full force in Africa as a result of the significant
slowdown in demand in the rest of the world, which has caused a huge decline in
demand for African exports, IMF officials said.
"The repercussion of the financial crisis will be deeply felt in Africa,"
Diby said, adding that the impact of the crisis is characterized by the emerging
facts including what he called "the scarcity of direct investment fund."
Echoing Diby's view, Tanzanian Minister of Finance Mustafa Mkulo said: "If
it was not for the economic crisis, the (Tanzanian) economy was robust. We are
doing very well. In fact, we had a sustainable 7-percent growth rate for more
than three years."
Underscoring the extent of the challenges, the IMF issued a new economic
forecast on Wednesday, projecting that the world economy would shrink by 1.3
percent this year, the first decline since World War II, in what the IMF called
"by far the deepest global recession since the Great Depression."
Hurt by the global economic recession, growth in sub-Saharan Africa is
projected to decline from just under 5.5 percent in 2008to 1.5 percent in 2009
before recovering to about 3.75 percent in 2010 -- still below its pre-crisis
level, the IMF says in its latest regional outlook for the continent.
Last year, Tanzania registered a growth rate of 7.4 percent, and this year
it had projected a growth rate of 7.8 percent, Mkulo said. "These figures were
confirmed by the IMF."
"But unfortunately, six months ago it (the financial crisis) happened," he
said. "It deterred our economic growth efforts."
The impact of the global economic meltdown has led to a drastic drop in
Zambia's export earnings and household incomes, and increased unemployment,
especially in the mining sector, said Musokotwane.
"There are more than 12,000 workers (who) have been laid off in the mining
sector," he noted. "Zambia's currency, the Kwacha, has also depreciated sharply
because of the slowdown in financial direct investment."
"Demand for African exports has weakened and prices for most commodity
exports have fallen," said Antoinette Sayeh, director of the IMF's African
department, at a press briefing on Friday. "Tighter global credit and investor
risk aversion have led to a reversal of portfolio inflows, are discouraging
foreign investment, and have made trade finance more costly."
NOT FULLY RELYING ON EXTERNAL
AID
The annual spring sessions of the World Bank and the IMF is the first world
gathering on the global financial crisis since the G20 leaders pledged in early
April in London to boost support for the World Bank, the IMF and other
international organizations by 1.1 trillion U.S. dollars.
The Tanzanian minister said that G20 leaders should honor their pledge at
their London summit. At the same time, he rebuked the statement that African
countries rely too much on the external assistance from such international
organizations as the World Bank and the IMF.
"It's not true that we are raising our hands, and it's not true that we are
bending our arms to them," he said.
"For Tanzania, we are talking as partners," he said, referring to his
meeting with the IMF chief and adding that he, on behalf of the Tanzanian
government, thanked the World Bank, the IMF and G20, which groups 20 largest
economies in the world, for what they are going to do in assisting his and other
African countries.
The IMF said that the abrupt slowdown puts at risk earlier hard-won gains
and progress against poverty in Africa. While the appropriate policy response
depends on country-specific circumstances, the priority for all sub-Saharan
countries must be to contain the adverse impact of the crisis, which has
resulted in slumping trade and commodity prices.
Financing is likely to remain strained because of declining capital
inflows. Generally tighter global funding conditions are expected to have
noticeable effects on middle-income countries, particularly South Africa and the
frontier markets of Ghana, Kenya, Nigeria, and Tanzania, the report said.
The finance minister of Cote d'Ivoire said that the African countries lack
the resources which the developed countries have for their ambitious stimulus
package, and he called on the developed countries to support them in their
efforts to reduce the weight of burn of foreign debts.
In order to stimulate the economy, "we have signed mining contracts with
different companies," the Tanzanian finance minister said, citing the contracts
his government signed with two companies from Canada and one from Australia.
"We're continuing negotiations for that, so the people of Tanzania can
benefit from our natural resources," he added.
"Steps have been taken to boost the performance of non-traditional exports
on the international market as a way of raising money for the country," the
minister said.
"WE'RE NOT THE ONLY ONE DEPENDING ON FOREIGN
AID"
For his part, Musokotwane also appealed for increased allocation of
financial resources to support critical social expenditure and long-term
investment necessary for economic diversification.
Meanwhile, the minister acknowledged the importance of the external
financial assistance. But he also denied that African countries are the only
ones that rely on outside financing amid the crisis.
"It's not (just) us depending on external financing," Musokotwane argued
when an African reporter challenged him on the assistance issue.
"Rich countries, like the United States, also ask for help from the outside
world, (for example,) they borrow money from China, Saudi (Arabia) and other
countries," he noted.
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