TUNIS Nov 13 The global credit crisis has come
just as African economies were turning the corner, forcing
governments to delay or scale back projects to stimulate growth
and fight poverty, government officials and economists said at a
gathering in Tunis.
Many African countries have spent decades gearing economic
policies to attract more private capital and dispel a reputation
as unreliable investment destinations.
The continent's economic growth has accelerated as inward
investment grows and foreign capital takes a bigger role in
road, power and utility projects.
But turmoil on world markets has cut the supply of money as
the world's biggest banks shift funds from new projects to
shoring up balance sheets, leaving African governments wondering
how their infrastructure will get built.
"A number of African policy makers feel doubly sad about
this situation," the World Bank's Vice President for Africa,
Obiageli Ezekwesili, told Reuters at the Tunis conference.
"Many have been steadfast in pursuing sound policies and
gone to second and third-generation reforms to diversify their
economies and now they are saying: 'What is this?'"
Economists and central bank officials said African banks
were mostly decoupled from the financial crisis but delegates at
the conference said Africa was already suffering from gathering
recessions in rich countries.
"The information we are getting on the ground is that
promised funding is declining," said Leonce Ndikumana, head of
research at the African Development Bank.
Kenya's government planned to issue bonds on the
international market and must now hold back as the risks are too
high. Tanzania is also delaying a move to seek capital, he said.
"This crisis could not have come at a worse time for the
African continent; it constitutes a major setback at a time when
African economies were turning the corner," African finance
ministers and central bank heads said in a statement at the
Ezekwesili of the World Bank said remittances to the
continent by Africans working abroad -- a lifeline for poor
relatives back home -- are falling and trade finance, which is
essential for export-reliant countries, is drying up.
Goals for poverty reduction, already compromised by the food
crisis, will see another setback, she said, especially if cash
strapped donor countries fail to send promised development aid.
"I listened to the ministers of Liberia and Sierra Leone and
you can clearly see a feeling of vulnerability at its deepest,"
Delegates from Zambia, Uganda and other countries reported
investors selling securities and pushing down local currencies.
Tumbling prices of commodities such as copper meant
investment by exporting states could collapse, said Ezekwesili.
Ndikumana of the ADB said there was growing pressure for
loans from African banks to make up the lack of foreign
financing and those banks had begun seeking assistance as they
are unable to find enough resources.
More African states have turned to western banks in recent
years to help build ports and bring power to their populations.
Guinea and Ethiopia were preparing to raise finance for
electricity networks when the crisis struck, said Gilbert
Mbesherubusa, the ADB's head of infrastructure development.
"Projects which are ready to go may suffer just as a
consequence of what is going on," he said.
Road projects needed to boost regional integration were also
threatened, he said, even though they tend to be funded by
foreign governments, not banks.
"We are talking about a 700 billion dollar (U.S.) bank
bailout using public funds. Is America willing to continue its
public funding of Africa at the same pace? We are afraid it is
not," he said.
(Editing by Giles Elgood)
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