Many countries in sub-Saharan African are less prepared to deal with an economic shock now than they were during the 2008 food and fuel crisis and the global financial turmoil that followed, IMF chief Christine Lagarde said on Wednesday, urging developing nations to build up their economic defences.
Ms. Lagarde was speaking during a trip to Niger, one of the world’s poorest countries and Africa’s newest crude oil producer, during which she met President Mahamadou Issoufou and praised his development plans.
Ms. Lagarde’s Dec. 18-22 trip to Africa, which also included a visit to OPEC-member Nigeria, comes as concerns grow over the impact on developing countries of Europe’s sovereign debt crisis through a possible drop in global trade, workers’ remittances and investment.
She said many African countries were able to weather the 2008 and 2009 economic shocks well, maintaining health, education and infrastructure spending and recovering quickly to growth rates enjoyed in the mid-2000s.
“In short, they built up macroeconomic buffers and put their economies on a fundamentally stronger footing. This enabled most countries to maintain critical social and infrastructure spending when the crisis hit,” Ms. Lagarde said in a speech to Niger’s National Assembly.
“But, for many countries in the region, my main worry is that their capacity to absorb further shocks is less than it was three years ago,” she added. “This would be even greater cause for concern if the global slowdown turns out to be more pronounced this time around.”
She said a sustained growth slowdown in advanced countries could cut into demand for Africa’s exports.
“It may also inhibit private financing flows, remittances, and possibly aid. This is not a welcome thought for Niger. Aid flows are important and remittances have already been disrupted by the upheaval in Libya,” she said.
Ms. Lagarde said Niger, a top uranium supplier to former colonial master France and which began pumping oil earlier this year, could use its resource revenues to “promote more broad-based and inclusive growth” but needed to avoid pitfalls suffered by many other countries.
“There is the hard truth that relatively few countries have managed natural resource wealth well. Although, Niger has an advantage. You can benefit from the experiences of others,” said Ms. Lagarde, a former French finance minister.
She said Niger needed to ensure transparency, invest its revenues wisely, and diversify its economy to avoid the shocks associated with volatile commodities markets.