WASHINGTON, D.C., May 5, 2009 – The next G-20 summit should focus on financing development if the negative impact of the global economic crisis on Africa is to be minimized, the World Bank Vice President for the Africa Region Obiageli Ezekwesili cautioned Tuesday.
Even before the crisis affects Africa’s relatively sound financial sector, it already dangles the specter of political instability, social unrest, and could unleash a major humanitarian disaster on the “world’s last development frontier”, Ms. Ezekwesili told participants at a day-long conference in Washington, DC.
Her remarks came in a keynote address delivered at the inauguration of the 2009 Annual Conference organized by the Washington-based Society for International Development on the theme “Finding Common Ground on Foreign Aid”. Organizers said the conference was convened to seek views of US development institutions, multilateral financial organizations and of recipient countries on whether or not US aid is playing a useful role in the developing world.
Although rich countries are also reeling from the crisis they must resist the temptation to slash foreign aid and resort to protectionist practices, the World Bank Vice President urged, as she appealed to the US government to continue to provide leadership in ensuring that pledges to double aid to Africa by 2010 are honored.
“We want action!” was the message brought by government delegations from Africa attending the Spring Meetings of the World Bank and the International Monetary Fund over the last weekend of April, according to the World Bank Vice President. “Tell our development partners to stop recommitting to aid commitments. They should just do it!”
A US pledged contribution of US$3.7 billion to last year’s record $42 billion 15th replenishment of the International Development Association (IDA) – the soft lending arm of the Bank that provides grants and interest-free credits to poor countries – is pending authorization and appropriation before the US Congress.
Initiatives to stimulate the economies of developed nations should not focus exclusively on national challenges, if a truly sustainable and global recovery from the crisis is to be achieved, Ms. Ezekwesili argued.
She cautioned against those who may be tempted to view Africa as a case of charity. The continent has become a “vital” and “strategic business destination” and firms investing there boast some of the best profit margins, she explained.
Aid must be used to leverage more resources, including from domestic sources and local currency bond issues, as well as to foster further reforms across the continent given the high pay-back nature of such initiatives.
She cited the impact of IDA-funded reforms in the telecommunications sector in Nigeria, where telephone lines surged to 60 million within five years from the 500,000 fixed phone lines the country counted many decades after independence. She pointed to World Bank studies that have found that Africa’s productivity would increase 40% and its GDP growth would increase an additional 2% if the entire continent could upgrade its infrastructure to the levels of infrastructure in Mauritius.
“Aid cannot be the panacea” either, but must act as a catalyst, Ms. Ezekwesili acknowledged, praising Africans for providing much-desired but hitherto missing leadership.
Aid, she argued, is certain to be used more effectively because the continent now has a leadership even more committed to reforms, governing more responsibly, and making the right kinds of policy choices to use any resources in transparent, efficient and accountable ways.
Before the global economic crisis, Africa was generally perceived as turning the corner. Average annual growth rates were 5.7% over a decade before a “crisis that is not even remotely of Africa’s making” triggered a collapse in commodity prices, a decline in private capital flows, a decrease in remittances, and a fall in foreign aid. As a direct result of the crisis, Africa’s GDP growth is now expected to be a mere 1.7% in 2009, down from earlier forecasts of 6.4%, and way below the average population growth rate of 3.3%.
Given the real danger of a reversal of gains made by African countries after years of tough choices and politically difficult reforms, Ms. Ezekwesili stressed the need for donors to provide appropriate funding in a more expeditious manner to help the hardest-hit African countries to maintain economic stability, sustain growth, address volatility, and protect the poor.
She also stressed the need for aid to help expand the opportunities for trade, including through ensuring the successful completion of the Doha Round of Trade Talks; and the need for African governments to diversify their economies from single commodities, and to more adequately regulate markets without renouncing market-based reforms and the role of the private sector in creating jobs and wealth.
RSS