IMF ON AFRICA’S HIGH FOOD AND FUELS PRICES
BY Paul Ndiho
May 6, 2011
The International Monetary fund (IMF) says Sub-Saharan Africa’s recovery from the global financial slowdown is well under way, with growth in most countries now close to the highs of the mid-2000s. Growth this year is expected to be robust.
Economic growth in sub-Saharan Africa has largely returned to the levels that preceded the global financial downturn, according to the IMF’s Director for Africa:
“Sub-Saharan Africa’s recovery from the global economic downturn is proceeding quite well. Our best estimates at this point is that in 2011 we’ll see growth approach some 5-1/2 percent, up from the 5 percent growth achieved in 2010. All of this, of course, depends on the global economic recovery continuing to proceed as well. And as you know, there are some uncertainties surrounding that,”
The IMF’s report on economic growth in Africa accounts for higher average oil prices which would result in higher import bills for most countries in the region.
Also, a surge in food prices has begun to nudge up consumer prices across the continent. In some countries, inflation has not increased much, reflecting good local harvests, according to Antoinette Sayeh.
“So far the impact on domestic inflation in many countries has been limited. Some countries have had very good harvests and so have been able to see mitigation on the inflation rate because of that. Our sense, though, is that in the next few months many countries, if not most countries, will see, certainly from the food shock and also from the fuel shock, high pressures on inflation that they will then have to respond to.”
Inflation rates are on the rise throughout east Africa. People are unhappy over the rapid increases in food and fuel prices, In Kenya, Uganda, Tanzania and Rwanda the cost of food and fuel has increased sharply over the past few months. The high prices have triggered a wave of street protests as people call on their leaders to help ease the cost of living. Sayeh says governments should figure out how to help those who need it the most.
“In the short term, of course, with these increased food and fuel prices it is important for governments to look at their budgets and see what room they have to implement targeted initiatives to mitigate the impact on the poor. Of course, they have less space this time around than they did in 2008, so it’s very, very important to make sure that they avoid very costly initiatives and that those initiatives are properly targeted on those who need help most, and those are the poor.”
The IMF urges low income but growing African countries to focus on medium-term debt sustainability, better spending, and on finding room to help vulnerable households affected by higher food and fuel prices.