The impact of the global financial crisis on Africa’s economy is still evolving. However, early assessments indicate that the crisis could undermine decades of progress marked by economic growth and investment.
According to experts, the crisis could have a triple effect on Africa. First, a slow down in private capital may affect infrastructure investment. Second, falling commodity prices could hurt exporters. Third, the estimated $15 billion in remittances sent to Africa each year, could decrease significantly.
Some countries already are feeling the pinch. Kenya, Senegal, Tanzania and Ghana have put on hold plans to access international capital markets, with Ghana and Kenya postponing sovereign bond issues worth about $800 million.
Major markets like Nigeria and South Africa have been depressed due to a higher than normal exit of foreign investors -- more net outflows than inflows. Those higher net outflows have increased demand for the dollar and other hard currencies, resulting in the depreciation of a number of African currencies.
African finance ministers have called on international finance institutions like the World Bank Group and International Monetary Fund to support their countries as they face the global crisis.
In response, the Bank is mobilizing its instruments in the following ways:
Increasing International Bank for Reconstruction and Development lending to $100 billion over the next three years;
Making available $42 billion in International Development Association grants and interest-free loans to the poorest countries; and
Helping the private sector through support for trade, banks and infrastructure projects.