Failure to deal with Europe’s debt crisis could depress sub-Saharan Africa’s export earnings and financial flows, undermining the region’s recovery from the financial crisis, a senior IMF official said.
First sparked off by Greece, concerns about the fiscal health of the euro Zone has spread this year, undercutting the euro and causing falls in markets around the world.
“Of course, to the extent that the crisis is not dealt with appropriately and spreads to other advanced countries… one could see a negative impact on Sub-Saharan Africa,” said Antoinette Sayeh, IMF’s Director for Africa Department in a press conference.
“There are many channels through which such an impact could materialize: export volumes, the price of exports, remittances which are important for some countries, financial flows, all these could decline in the event of deterioration in Europe’s debt crisis.”
IMF was maintaining its 5% growth forecast for sub-Saharan Africa in 2010 based on their assessment of the region’s performance in the first half of the year, Sayeh said.
Sayeh said Uganda and other regional countries need to be prepared to absorb any potential shocks that may result from a possible severe downturn in the European economy.
“Europe is a key export market and also a source of official financial assistance and financial inflows so there’s clearly a risk there from what could be a difficult situation,” she said.
In its Global Economic Prospects 2010 report, the World Bank said it was concerned aid flows to the world’s poorest countries would fall sharply amid belt-tightening in donor nations.