Links ~ Africa Part 2....September 25, 2011
Okonjo-Iweala canvasses joint facility for IMF member countries
Coordinating Minister of the Nigerian Economy and Minister of Finance, Ngozi Okonjo-Iweala, has canvassed the creation of a multilateral facility where the International Monetary Fund (IMF) and Central Banks can work together to provide liquidity to member countries facing financing pressures.
She made this call yesterday on behalf of other African Finance Ministers (Angola, Botswana, Burundi, Eritrea, Ethiopia, The Gambia, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Nigeria, Sierra Leone, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe) at the World Bank/IMF meetings in Washington DC.
She acknowledged that the International Monetary System (IMS) has contributed to global output growth, enhanced global trade, and deepening financial integration.
However, the Finance Minster noted that the deficiencies of the IMS were once again evident during the global financial crisis. These she said have increasingly been the source of tension that, left unaddressed, could threaten the progress of globalisation and the accompanying prosperity.
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Consequently, she said if the IMS was to help global recovery and maintain stable growth going forward, there was need for speedy reform. "In this regard, we urge the Fund to take the necessary steps to strengthen multilateral commitments from all members, create a collaborative framework for orderly cross border capital flows, ensure reliable access to global liquidity in crisis times, and provide a wider range of safe global assets, all of which are mutually reinforcing.
"It could be recalled that during the recent financial crisis, short term-liquidity provision necessitated a series of one-off liquidity injections by individual Central Banks," she said.
Besides, she said the African Finance Ministers were also open to considering greater international use of other currencies than the four currently in the SDR basket, including those of large dynamic emerging markets. "Nevertheless, we believe that the SDR could play a greater role in strengthening the IMS," she said.
Nigeria’s Finance Minster noted that the global economy experienced remarkable growth in 2010, but economic activity is slowing down and has become more uneven with increasing downside risks. "In many advanced economies, growth continues to be weak, with high unemployment rates, and increasing concern over sovereign debt crisis in the Euro area and greater uncertainty over the US economic outlook. Given the uneven nature of global growth, policy challenges differ considerably across countries. In most advanced countries, the main policy challenge is to sustain the recovery and reduce the lingering high unemployment while moving forward with the required fiscal adjustment and the necessary financial sector reforms and repairs.
" In contrast, growth in emerging market economies continues to be strong, leading to concern that rising commodity prices could exacerbate inflationary pressure in a number of these economies," she said.
For Sub-Saharan Africa, she noted that the growth outlook remained optimistic. "The resilience and rapid recovery of the majority of Low-Income Countries (LICs) from the global crisis reflect their strong structural reforms efforts, pre-crisis macroeconomic policy buffers built during the good days, and increased ownership of policies, and flexibility in the fund’s financing and engagement with the authorities. These reform efforts were instrumental to attracting investment inflows into the region," she observed.
However, Okonjo-Iweala noted that continuing these trends would hinge on robust growth and recovery in advanced economies. "The rising global demand for commodities is arguably a key driver of the enhanced GDP growth together with increases in the prices for oil, minerals, grain, and other raw materials. On the other hand, rising global food prices have put upward pressure on inflationary trends and exacerbated food insecurity for many countries in the region, particularly net food importing countries.
An acute drought, the worst in six decades, has hit hard the greater Eastern African region and has exacerbated chronic food scarcity throughout the region," she stressed.
For some emerging market and developing economies, she said there was a need to accelerate the unwinding of accommodative macroeconomic policies to avoid overheating in the face of strong economic activity, while ensuring that the poor are protected from the effects of higher food and fuel prices
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