The global crisis has hit African countries harder than initially anticipated and the continent will lag the rest of the world in recovery, the African Development Bank (ADB) said on Sunday.
Africa has seen a sharp decline in investment flows while credit financing has dried up, chipping away at infrastructure development, ADB president Donald Kaberuka told reporters on the sidelines of the International Monetary Fund/World Bank spring meetings.
”At the beginning of the crisis we thought maybe it would take a year and a half for the effects to reach us. The effects have been faster than expected on African currencies and investment flows,” he said.
”What is most damaging in this is, we have been hit faster than expected and my expectation is that once the recovery sets in, African countries will recover much more slowly than the rest of the world.”
The global financial and economic crisis, stemming from the collapse of the US housing market, has decimated African exports. That, combined with declining commodity prices, foreign direct investment flows and worker remittances, has exerted fiscal pressure on many governments.
Kaberuka said there had been sharp pull backs in mining investments, with the most affected areas being in Zambia’s Copper Belt, the south western Democratic Republic of Congo, Liberia and Guinea, where aluminum and iron ore projects worth billions of dollars had been scaled down by half.
”The other area, which is quite unfortunate, is infrastructure. We are beginning to see a lot of sudden retrenchment here,” said Kaberuka.
Maintaining infrastructure spending is critical to attracting foreign investment in Africa, especially after years of neglect in some countries.
The World Bank on Saturday launched two new funds with an expected financing of $55-billion over the next three years to try and ensure infrastructure projects in developing countries do not dry up in the financial crisis.
The funds are expected to focus largely on projects in Africa. The World Bank estimates the financing gap for infrastructure projects could range from $140-billion to $270-billion. – Reuters