Africa and the G-20 promises: Deal or wishful thinking?

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African countries are beginning to get some of the additional aid they need to survive the current global economic downturn. But there is considerable doubt that enough of the funds will arrive in time – if it arrives at all – to make much of a difference.

The Group of 20 (G-20) countries, representing the world’s major economies, pledged over $1 trillion in financing to deal with the crisis at a 2 April meeting in London, including $50 bn for low-income countries. Yet, how much of what the G-20 offered is new money and how much of it Africa will receive and when remains unclear, said the Africa Progress Panel, an advocacy group, in a June report. Most of the money is slated to go to the International Monetary Fund (IMF) so that it can lend more to countries affected by the crisis. In addition, the G-20 promised to help regional banks like the African Development Bank (ADB) to lend more. The G-20 leaders also supported reforming the IMF, so as to give “a greater voice and representation” to developing countries.

The G-20 promised to treble resources for the IMF to $750 bn, increase loans made by the multilateral development banks by at least $100 bn, and provide $250 bn more for trade finance.

‘Rich countries can do more’

A retooled and replenished IMF with greater political oversight would represent “a great victory for Africa,” then South African Finance Minister Trevor Manual said in mid-April. In May, Kenya and Tanzania tapped a new IMF fund set up to help countries with sudden crises. According to the Fund, lending to Africa totalled $1.5 bn by the end of May, both from the crisis account and from existing programmes.

The Fund says it is also easing the conditions it imposes on borrowers and doing more to preserve anti-poverty efforts. Its director, Dominique Strauss-Kahn, claimed this would give developing countries, “more breathing space to adjust to the crisis.”

Other African officials welcomed the measures but urged further action. “The general impression is that the rich countries can do more to assist developing countries,” Tanzanian Minister of Finance and Economic Affairs Mustafa Mkolo told journalists at an April meeting of the Fund and World Bank in Washington.

Aid uncertain

Despite the new initiatives, aid prospects continue to be mixed. Aid to Africa in 2008 rose by some 10 per cent. But this was after declines in the previous two years. As the African Union and the UN Economic Commission for Africa point out in their Economic Report on Africa 2009, aid levels are well down from the $72 bn a year considered necessary to meet the internationally agreed Millennium Development Goals by the 2015 deadline.

The new US administration says it will double aid over the next five years. The UK has pledged to maintain commitments and Denmark has pledged $3 bn for youth employment and private sector investment. However, the industrialized countries’ Organization for Economic Cooperation and Development acknowledged in late May that some members have already cut their aid budgets because of economic hard times and that others are unlikely to meet existing commitments.

Even if aid budgets are not cut, the World Bank says, the financial gap between what Africa needs for development and what it gets will continue to widen. The shortfall is expected to reach $30–40 bn this year.

Longer-term needs

Short-term cash also carries dangers, the ADB warned at its annual meeting. More aid could be a “mixed blessing,” if many countries forced to borrow. This could undermine recent progress in reducing the continent’s debt burden. The bank also warns that resources could shift to crisis responses at the expense of long-term development programmes.

To ensure that Africa’s development needs are kept in focus, leaders have urged a stronger voice — and voting power — for developing countries in the international financial institutions. These bodies still do not fully take into consideration developing countries’ concerns Nigerian Foreign Minister, Ojo Maduekwe, complained after attending a meeting of Northern finance ministers in Italy in June. Some tentative steps are being taken, such as sub-Saharan Africa’s acquiring a third seat on the executive board of the World Bank. But the pace is slow and the extent of change remains unclear.

Some critics have urged new or at least more democratic institutions, more regulation and different policy prescriptions. The European Network on Debt and Development (Eurodad), a coalition of 55 non-governmental organizations, argues that the IMF is still promoting unduly harsh fiscal and monetary policies in poor countries in response to the crisis.

A 24–26 June UN General Assembly conference on the impact of the recession on development heard numerous calls for reform of the international financial system. “The crisis exposed the need for a greater voice for developing countries in how the international financial system is operated and regulated,” said Gambian Vice-President Isatou Njie-Saidy. “For a crisis that we did not trigger but for which we bear the greatest burden,” she added, “it is absolutely logical that decisions about us be taken with our full participation.”

Pull Quote

“For a crisis that we did not trigger, but for which we bear the greatest burden it is absolutely logical that decisions about us be taken with our full participation.”

— Gambian Vice-President Isatou Njie-Saidy

Mr. Roy Laishley is a writer for United Nations Africa Renewal magazine.

Africa Renewal  Africa Renewal magazine, published by the United Nations, examines Africa's development, achievements and challenges. It provides expert analysis and on-the-spot reporting to show how policies affect Africa's people.
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