GLOBAL ECONOMIC CRISIS

IMF Pledges Stronger Partnership to Help Africa Through Crisis

IMF Survey online

May 28, 2009

Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), has pledged a stronger partnership with African countries to prevent the global economic crisis undoing years of progress in their fight against poverty.

Speaking at the end of a trip to the Democratic Republic of Congo and Côte d’Ivoire on May 27, he said the IMF had already doubled borrowing limits for the poorest countries and was working to provide them with even greater and more flexible lending.

“Africa currently finds itself the innocent victim of a financial crisis that has its origin in advanced economies. Coming so soon after last year’s food and fuel price shock, the global recession adds to the vulnerabilities of low income countries through falling commodity prices, reduced trade and investment, and threats to development assistance,” said Strauss-Kahn at the conclusion of his visit to Abidjan.

Stronger partnership

“In response, the IMF is strengthening its partnership with Africa,” he said in a press statement. “Africa will find in the IMF a good friend, ready with support and candid in advice.”

After industrial countries and emerging markets, the poorest and most vulnerable countries are being hit hard by a third wave of the global crisis, causing Africa’s export earnings to plunge and reducing foreign investment. Growth in sub-Saharan Africa is projected to decline from just under 5½ percent in 2008 to 1½ percent in 2009 before recovering to about 3¾ percent in 2010—still below its precrisis level, the IMF says in its regional outlook, released on April 24.

But progress made in recent years showed that Africa could respond by ensuring political stability and strengthening governance to attract investors.

Strauss-Kahn said that the IMF had “substantially increased our financing to Africa and are ready to do more.”

African finance ministers and central bank governors at a meeting with the IMF in March in Dar es Salaam had mandated Strauss-Kahn to argue their case for increased aid flows and financial assistance at April’s Group of Twenty (G-20) summit of advanced and emerging market leaders in London.

Outlining progress made since the Dar es Salaam meeting, the Managing Director noted the G-20’s request for at least $6 billion in additional concessional IMF resources for low-income countries, and reiterated the Fund’s commitment to meeting that objective within the next two to three years. “We are committed to this goal and to continue the reform of the lending tools and policies we use to support your efforts,” he added.

The IMF has also loosened fiscal targets in about 80 percent of African countries with active Fund programs and new IMF lending to Sub-Saharan Africa in the first five months of 2009 has already topped US$1.5 billion--double the level for 2008.

Recovery from war

In Côte d’Ivoire, Strauss-Kahn met with President Laurent Gbagbo and Prime Minister Guillaume Soro and commended the people of Côte d’Ivoire on their commitment to peace and development as their country recovers from civil war. Côte d’Ivoire received two IMF Emergency Post-Conflict Assistance (EPCA) credits in 2007 and 2008 for a total of $123 million and late last year was deemed eligible for the enhanced Heavily Indebted Poor Countries (HIPC) Initiative (see press release). In March, the IMF’s Executive Board approved a three-year, $565.7 million arrangement under the Poverty Reduction and Growth Facility (PRGF), to support the authorities’ economic and reform program (see press release).

Earlier this week, Strauss-Kahn visited the Democratic Republic of the Congo where he held a series of meetings with the leadership of DRC, including President Joseph Kabila, parliamentarians and representatives of trade unions and the civil society.

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