In early June 2009, African ministers of finance, planning and economic development met in Cairo to discuss ways of dealing with the global financial crisis. It was a timely meeting. Not only is the world at large teetering under the weight of multiple systemic crises, but millions of people in Africa in particular are disproportionately affected by these events. EJN presents its statement to the ministers.

The dire situation posed by the crisis is acknowledged even by the International Monetary Fund, which has projected that advanced economies will experience a decline in output of between 3% and 3.5% in 2009, and scarcely grow in 2010, with growth of between 0% and O.5%. What is worse is that developing countries will struggle to secure external finance. A UN Report by the Education for All Global Monitoring warns that the poorest countries will find it difficult to insulate their citizens from the financial crisis, with an estimated 43 out of 48 low income countries incapable of providing a pro-poor government stimulus.

 In 2008, 130 – 155 million people were pushed into poverty because of the food and fuel crises. The financial crisis has led to a decline in global demand for goods, spiraling unemployment and a global recession. There is a decline in export revenues, foreign investment and remittances. Africa is facing a financial crisis, economic crisis, food crisis and climate change crisis. The consequences for sustainable development and poverty reduction are severe.

 A strong African leadership is necessary to mitigate the crisis in the continent. Structural policy reforms are needed nationally, regionally and globally. The G20 Summit in London in April 2009 ended with a rescue package of US$1.1 trillion to save the battered world economy. US$500 billion of this money will go to the International Monetary Fund.  That the IMF gets a stronger mandate to resolve the financial crises is alarming given its disastrous track record in this business.  The current system has little credibility and legitimacy. It is more important than ever that Africa stands up for reformed institutions based on responsible finance principles.

The G20 communiqué makes reference to an IMF gold sale to release US$ 1 billion to low income countries. However, the IMF spring meetings did not reach a consensus on this matter. African leaders should call for a full additional profit from the gold sales – US$5 billion –to be used for the poorest countries. We consider it absolutely crucial that these resources are mobilised in non debt-creating forms of assistance – either debt service relief and/or grants – and without any economic policy conditionality.

Many countries in Africa have during the last years experienced debt reliefs and made progress in stabilising the external debt. With increased borrowing for coping with the current economic crisis it is time for caution. We face a threat of a new debt burden. It is now important that the African leaders are at the forefront of strengthening efforts for global principles for responsible lending and borrowing.

 Almost all African countries have limited government funds to manage large scale crisis-responses. Yet national responsibility is critical to stop the deepening economic crisis. Domestic mobilisation of resources including taxes and fair income distribution should be at the top of the agenda.

Efforts to stimulate national demands for goods and regional/south-south trade are important. Africa cannot rely only on the US and European markets. The Interim Economic Partnership Agreements (IEPA) have already divided Africa rather than encouraged regional integration. The IEPAs have divided Africa into insignificant groupings to face a united and solid European Union.

 Africa is lacking in infrastructure. Efforts to invest in infrastructure are a good way to enhance domestic job opportunities. Africa must not ignore the challenge of climate change and must refuse to be locked up in oil intensive infrastructure and investments. A rescue package to mitigate the economic crisis should include renewable energy and environmental friendly technology.  Moreover, a fair and just climate change agreement in Copenhagen is needed.

 Increased investments in agriculture are crucial for poverty reduction in the region. The financial crisis has however lowered the global food prices. Food insecurity is still a big problem especially for net importers of food. Governments in Africa and the international aid community need to promote sustainable agriculture and increase investment in agriculture. Governments must secure food security and put in place policies that ensure that all people have access to sufficient, affordable and nutritious food.

We are of the firm belief that while the Group of 20 leaders have held numerous meetings to craft ways of dealing with the crisis, developing countries do not have a place on that table. The lack of global participation in seeking global solutions is an issue of concern to us. The United Nations Conference on the World Financial and Economic Crisis and its Impact on Development, which was supposed to be held from 1 – 3 June has been postponed and will now be held from 24 – 26 June.  This conference is significant for reaching specific commitments for a global long-term solution for developing countries.  We therefore urge strong representation in this conference.

 The income from exports has been an important source for developing countries´ Gross Domestic Product.  With reduced global demand for goods that come from Africa the export industry will be affected as well as the private capital inflows. We have already seen businesses closing down and an unprecedented increase in the levels of unemployment. 3,000 jobs have been lost in Zambia’s mining industry since December 2008. In DRC the Katanga province 300,000 jobs have been lost where mines are closing down. In South Africa job losses will reach 250, 000 by the end of the year. Over 77 percent of the remittances (money sent home from expatriates) coming to Africa are from the US or the Western Europe. Since the financial crisis has increased unemployment in the US and in Europe remittances will decline. It is also a big concern that the international aid flows will be decreasing. The impact of such a scenario will be especially prominent in highly aid dependent countries.

 EJN recommends the following to the ministers meeting in Cairo, Egypt: 

1.  While accepting the increased role of China, India and Brazil in the G20 grouping, we are of the view that the United Nations should be the avenue for discussions and decisions on the global economy. African finance ministers should support calls for the establishment of a Global Economic Coordination Council within the UN system.

2. We recommend that the UN Conference on the World Financial and Economic Crisis and its Impact on Development (24 – 26 June) be treated with the seriousness and political weight that it deserves. In this regard, we urge the ministers meeting in Cairo to advise their African Heads of State to attend the UN meeting so that they can deal with the clear and present danger of the financial crisis. Specific commitments are strongly needed from this conference.

3. More policy space for developing countries so that they can manage their capital accounts. This way they would be able to control capital inflows and outflows.

4.  African finance ministers meeting in Cairo should call for radically reformed International Financing Institutions based on principles of responsible lending and borrowing. The IFIs must also seriously undergo a reform to be more representative and transparent.

5. Support the recommendation given by UNCTAD chief economist Yilmaz Akyuz, that countries should not be requested to provide loans to the IMF to bolster its resources as this compromises the IMF’s ability to carry out its surveillance function. Bolstering IMF funds for relending to countries hit by the crisis is dangerous as long as the IMF does not reform its policy conditions.

6. Be strong within the international aid effectiveness agenda and make sure that the aid community keep their promises on aid volume and strengthen the work on effectiveness. 

6. Stimulate national demand for goods and strengthen regional and south-south trade.

7. Increase investment in agriculture that includes support to small-scale and peasant farmers.

8. Include renewable energy and environmental friendly technology in all national and regional rescue packages to mitigate the economic crisis and stand up for a fair and just climate change agreement in Copenhagen.