Monday, May 10, 2010

How Real Is Africa’s Rebound?

The International Monetary Fund’s Managing Director, Dominique Strauss-Kahn, currently is in the midst of his third trip to Africa in the last year. He told a gathering of Kenyans that Africa is rebounding from the recent global economic crisis quite well. “All across the continent, we can see signs of life, with rebounds in trade, export earnings, bank credit, and commercial activity,” Strauss-Kahn said. The IMF’s 2010 World Economic Outlook found that “sub-Saharan Africa is weathering the global crisis well.”

So things are looking up for African people, right? Well maybe not as much as the statistics would indicate.

While the IMF anticipates overall growth in Africa to reach 4.5% this year, that will depend on the global economic recovery. That means the economic crisis in Greece that the European Union and the World Bank Group are trying to avert could reduce that figure. However, it turns out that even if the save-Greece package just approved does work and prevents an economic domino effect, Africa’s long-term recovery may be in danger from another source – African governments themselves.

Oxfam research indicates that developing countries, such as those in Africa, are cutting spending vital for long-term recovery. Budget data from 56 poor countries shows that poor countries are cutting spending on education, health, agriculture and social protection. Overall, budgets in developing countries this year are being cut on average by 0.2% of gross domestic product. Meanwhile foreign aid is not filling the gap because development aid fell by US$3.5 billion last year, and revenues for 2010 are expected to remain below what was received in 2008 before the economic crisis fully took hold.

So how do these cuts affect Africa? Oxfam estimates that 50,000 children in sub-Saharan Africa died last year because of funding shortfalls caused by the global economic crisis. If you cut medical treatment, people will die for lack of medicine and trained medical personnel, especially in vulnerable poor or rural areas.
Since 2000, African countries have voluntarily entered into agreements to boost social spending for the benefit of their citizens. African governments over the years committed themselves to spend up to 20% of their budgets on education, 15% on health, 10% on agriculture and 0.5% on water and sanitation. But some African governments lament that these agreed-upon targets limit budgetary flexibility and should be stricken from future agreements.

At the recent annual African Union and Economic Commission for Africa Conference of Finance, Planning and Economic Development, delegations from South Africa, Rwanda and Egypt argued successfully that any reference to the budget targets should be removed from the conference report.

“These targets do not make any sense,” said Cecil Noel, South Africa’s chief finance director. “I shall be asking my head of state to propose a review of these targets in the AU Summit in Kampala in July.”

Egypt’s Deputy Minister of Finance Hany Dimian echoed that sentiment. “The heads of state have made a colossal mistake. These targets straightjacket the process of budgeting in our countries.”

On the other side of the argument, Nigeria, Kenya, Ghana, Malawi and Cote d’Ivoire fought to retain the targets in the official document. “I worry about the precedence we are setting where we make commitments and drop them when it is expedient,” lamented Nigerian head of delegation, Ambassador Nyoko Toyo.

The African Monitor, a non-governmental organization established in 2006 to monitor and advocate in relation to G8 commitments to Africa, reports that last year 44 countries on the continent continued to import at least a quarter of their food, retention of girls in education and overall quality of education remains weak and people living with HIV-AIDS too often lack access to life-saving medicine. The refusal of African governments to spend to upgrade their education, medical and economic systems will keep them dependent on donor aid, which has been declining for years and will continue to decline.

The G8 nations have made promises to deliver certain percentages of aid to African countries and have failed to honor their commitments. How will African governments credibly demand that donor countries keep their word on development aid when many are in the process of breaking theirs for the very same issues?

This situation seems akin to eating one’s seeds rather than planting them. The Bible says you reap what you sow, or in this case, what you refuse to sow.

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