Sub-Saharan Africa will receive around $10 billion from the IMF in Special Drawing Rights (SDRs) to help its economies weather the global financial crisis, the Fund’s chief Dominique Strauss-Kahn says.
As part of a $1.1 trillion deal to combat the world economic downturn agreed at April’s G20 summit, the IMF will issue $250 billion worth of SDRs, which can be used to boost foreign currency reserves.
“The amount that will be available for sub-Saharan Africa is between $10 and $11 billion,” Strauss-Kahn, the IMF’s Managing Director, said at the end of a three-day visit to cash-strapped Democratic Republic of Congo.
“It is a huge amount, which will increase gross international reserves and stabilise their currency, not only here in DRC but all around the world,” he told Reuters.
The SDRs are expected to be issued in the coming months after a vote by IMF member states, Strauss-Kahn said.
As the world’s major economies have slipped into recession, demand for African exports has fallen sharply and prices of commodities such as cotton, copper and oil have plummeted.
Investment flows have also dropped as investors prefer to seek less risky assets. This has created pressure on reserves and foreign exchange rates of the continent’s largely import-dependent economies.
Sub-Saharan Africa’s economy is still expected to grow this year by 1.7 percent, compared with a decline of 1.3 percent for the world as a whole.
Still, that is well below pre-crisis projections, and many African nations are poorly prepared to deal with the effects of the downturn on their own.
“The main scenario that we have is already bad enough, which is one half the real growth that sub-Saharan Africa had last year,” Strauss-Kahn said.
“And for some countries with a large population increase, we can be very close to a zero net increase in capital.
Earlier this month, Ghana said it was in talks with the IMF to secure at least $1 billion of support, days after Zambia agreed a $256 million financing package from the Fund.
Congo, which is still recovering from decades of kleptocratic dictatorship and a 1998-2003 war, is due to receive around $600 million under the IMF plan.
Demand for oil and mineral exports, which make up around 60 percent of the vast central African nation’s total revenues, plunged last year. And dozens of mining companies pulled out of its copper and cobalt-rich Katanga province.
By February, its foreign currency reserves had dropped to nearly zero before the IMF released $200 million in emergency funds from its Exogenous Shock Facility to help Congo save its economy and stabilise its sliding franc currency.