AfDB Holds Workshop on Financial Crisis

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Tunis, 8 April 2009–In continuation of its efforts to devise ways of mitigating the prevailing financial crisis, the Chief Economist’s Complex of the African Development Bank (AfDB) group will host a workshop on Friday, 10 April 2009 in Tunis, to explore ways of helping the institution’s member countries deal with crisis.

Organised on the theme: “Financial Crisis – Strategies for Mitigating its Impact in Africa”, participants will consider how national governments, regional organisations and the international development community can help develop strategies that minimize the impact of the crisis while building internal capacities of African economies to withstand external shocks.

In addition to Bank staff, participants will include Governors of African Central Banks, high ranking government officials in the finance and planning ministries, and representatives of partner institutions, including the World Bank, the U.K. Department for Foreign and International Development, Overseas Development Institute and the United Nations Conference on Trade and Development.

Specific issues to be discussed at the workshop include “Domestic resource mobilization”, “Capital flows and capital account liberalization”  “Financial sector reforms and regulation”, and “The impact of the crisis on the manufacturing sector”.

The workshop is designed to create an opportunity for detailed technical discussions on the above issues, using empirical analyses as a guide in the search for sustainable solutions to the crisis as it affects Africa.

African economies have been hit by three successive crises since 2006 – the food crisis followed by the oil crisis and now the financial and indeed economic crisis. These crises have come at a time when hopes for resurgence in African growth were high, against the backdrop of relatively high economic growth averaging 5.8% over the last five years.

Africa’s growth had largely been driven by high commodity prices and economic reforms, which resulted in better economic management and an improved business environment. Both high commodity prices and the improving business environment attracted increasing amounts of foreign capital, with foreign direct investment rising by 16.8% in 2008 to a record US$61.9 billion, and net portfolio inflows reaching an all-time high of US$15 billion in the same year.

“It is now clear that the impact of the crisis, which was initially underestimated, is threatening to effectively reverse these positive trends. The continent’s projected growth rate of 2.8% for 2009 means that real per capita incomes will stagnate. Surpluses on fiscal and current accounts of 3% and 2.7% in 2008 are expected to turn into deficits of 5.4% and 4.3% of GDP, respectively in 2009. Export value growth will fall by 7.1% in 2009, while capital inflows, including remittances are expected to fall as well,” the organisers noted.

Beyond these economic impacts, lie real negative welfare effects arising from mounting job losses in key economic sectors. While African countries have initiated some responses to counter the slowdown in economic activity, the crisis requires global and adequately coordinated solutions.

The Bank has played a leadership role in policy advocacy and providing analytical support in the debate on appropriate policy responses to the crisis. In November 2008, the Bank, in collaboration with the African Union Commission (AUC) and the United Nations Economic Commission for Africa (ECA), organized a Conference of Finance Ministers and Central Bank Governors in Tunis, which examined the early impacts of the crisis and possible solutions for Africa, and provided valuable inputs into the G-20 meeting in New York in the same month. The gathering gave birth to the Committee of Ten Finance Ministers and Central Bank Governors (the C-10), which has already met in Cape Town on 16 January and in Dar-es-Salaam on 11 March 2009. The Committee identified the need for further analyses to inform the search for sustainable solutions to the crisis.