A joint policy document presented by continental body the African Union (AU) Commission, multilateral development finance organisation the African Development Bank Group (AfDB), regional intergovernmental organisations the UN Economic Commission for Africa (Uneca) and the UN Development Programme (UNDP), highlights that the conflict in the Middle East is impacting on global economies, with growth in African countries forecast to decline by up to 0.2 percentage points this year.
The report, ‘Impacts of the conflict in the Middle East on African economies’, warns that African economies, which were slowly recovering from the severe consequences of Covid-19, the Russia-Ukraine War and rising trade tariffs, could be among the most affected by the ongoing conflict in the Middle East.
The report recommends strategic inflation management to ensure short-term price-stability expectations and cautions oil-exporting countries to adopt strict fiscal discipline by managing windfall prices prudently, while strengthening debt monitoring and using energy reserves strategically.
Where fiscal space allows, it advises that temporary and targeted social protection measures be deployed to shield the most vulnerable populations from this crisis. The report also urges governments to avoid broad-based subsidies that could worsen long-term fiscal deficits and to diversify sources of energy, inputs and food supplies.
It also recommends that African governments strengthen regional and intra-African trade in oil and fertiliser markets to enhance resilience and ensure smooth inter-institutional coordination to harmonise strategic monetary and fiscal policies.
“The shocks affect us deeply, and we have no choice but to be resilient — and African countries have the means to respond. In Africa, we need to win the fight for energy independence.
“We must invest in domestic solutions and encourage young people to engage in innovation, digital technology and AI,” says UNDP Africa regional bureau director Ahunna Ezionkwa.
“The report reminds us that the continent demonstrates remarkable resilience,” says AU economic affairs, development, trade, tourism, industry and mining commissioner Francisca Tatchouop Belobe.
At the same time, the report calls on development partners, multilateral banks and development finance institutions to provide emergency support to African countries through crisis response measures and technical assistance.
Further, the report also recommends that the operationalisation of the African Continental Free Trade Area be finalised speedily, while strengthening large-scale domestic capital mobilisation. It also encourages Africa to diversify its energy mix by accelerating investments in renewable energy and the gas sector.
The report urges stakeholders in Africa’s financial ecosystem to speed up the implementation of the New African Financial Architecture for Development (Nafad), for which the AfDB has recently concluded continent-wide consultations.
Those consultations led to the Abidjan Consensus, in Côte d’Ivoire, on April 9. These consultations are aimed at speeding up reforms towards mobilising African financial resources at scale to boost development financing across the continent.
AfDB economic governance and knowledge management chief economist and VP Kevin Urama presented a report on the sidelines of the Spring Meetings of the International Monetary Fund and the World Bank this week, where he emphasised that the closure to shipping through the Strait of Hormuz in the Middle East had significant consequences for transport and trade.
The report says the main effects of the Middle Eastern conflicts on African economies include surging prices of hydrocarbons, food products and fertilisers, adding that they also cause disruptions to global trade, logistics and supply chains, and have made capital and foreign exchange markets volatile.
“Eighty per cent of the oil imported into Africa comes from this region, as well as 50% of refined petroleum. As a result of these conflicts, 31 African countries were already experiencing currency depreciation,” says Uneca executive secretary Claver Gatete.
To address this crisis, Urama urges African governments not to panic or take hasty decisions that could harm their fiscal balances.
“We must work to ensure that the Sustainable Development Goals under the 2030 Agenda and Agenda 2063 are achieved,” says UN deputy secretary-general Amina Mohammed.
“There is a need for global coordination, as no country or institution can face these shocks alone.
“In addition, a rapid response is essential, as was the case during the Covid-19 pandemic and the war in Ukraine, and people must be placed at the center of interventions, says AfDB senior VP Marie-Laure Akin-Olugbagde. – (Mining Weekly)
