The Impact of Financial Crisis on Africa
The impact of the financial crisis on Africa
By Eric Essuman Duodu
Most Africa countries had enjoyed steady but minimal economic growth in the last decade partly due to lack of good governance and accountability. Nonetheless, the emergence of the Western financial crisis has further deepened the economic woes of third world countries.
2. Many were of the view that the impact of the crisis on the continent would be minimal because of African’s limited integration in the global market but the effects are gradually becoming significant.
3. I would attempt to highlight the following facts to support the above assertions.
a. The financial crisis has lead to job cuts and in turn has caused an increase in unemployment in most Western countries, notably Europe, which is the destination of most African migrants. Subsequently, this development has caused a decrease in the capital inflow in the form of remittances which accounts for a significant measure of the well-being of the African populace and the economic growth as a whole. Accordingly to a report from the Committee of African Finance Ministers and Central Bank Governors established to monitor the crisis (March 21, 2009), foreign remittances have been steadily falling in Kenya since October 2008 from USD 61 million to USD 39 million in January 2009 and inflows from tourism also fell within the same margin.
b. The economic downtown has caused a fall in the foreign exchange from exports due to less demand for raw materials from Africa as result of cuts in consumer spending. According to the above stated report the continent recorded an overall deficit of 4.3 percent of GDP in 2009 as a result of 40percent decrease in exports between 2009 and 2010.The above has accordingly caused a decrease in government revenues across the continent
c. Infrastructural developments sponsored by affected donor countries and cooperate bodies have been delayed or suspended and international companies are struggling to
By Eric Essuman Duodu
Most Africa countries had enjoyed steady but minimal economic growth in the last decade partly due to lack of good governance and accountability. Nonetheless, the emergence of the Western financial crisis has further deepened the economic woes of third world countries.
2. Many were of the view that the impact of the crisis on the continent would be minimal because of African’s limited integration in the global market but the effects are gradually becoming significant.
3. I would attempt to highlight the following facts to support the above assertions.
a. The financial crisis has lead to job cuts and in turn has caused an increase in unemployment in most Western countries, notably Europe, which is the destination of most African migrants. Subsequently, this development has caused a decrease in the capital inflow in the form of remittances which accounts for a significant measure of the well-being of the African populace and the economic growth as a whole. Accordingly to a report from the Committee of African Finance Ministers and Central Bank Governors established to monitor the crisis (March 21, 2009), foreign remittances have been steadily falling in Kenya since October 2008 from USD 61 million to USD 39 million in January 2009 and inflows from tourism also fell within the same margin.
b. The economic downtown has caused a fall in the foreign exchange from exports due to less demand for raw materials from Africa as result of cuts in consumer spending. According to the above stated report the continent recorded an overall deficit of 4.3 percent of GDP in 2009 as a result of 40percent decrease in exports between 2009 and 2010.The above has accordingly caused a decrease in government revenues across the continent
c. Infrastructural developments sponsored by affected donor countries and cooperate bodies have been delayed or suspended and international companies are struggling to
References: 1. IMPACT OF THE FINANCIAL CRISIS ON AFRICA The unpredictable flows: remittances and aid Göran Holmqvist, Nordic Africa Institute, 4 May 2009 2. Report from the Committee of African Finance Ministers and Central Bank Governors established to monitor the Financial crisis (March 21, 2009),