ACP Countries Fear the Financial-Crisis Will Affect Them

Poor countries affected by the crisis

In theory, these countries are better protected than others owing to their being but poorly inserted into the global economic system. “We are not concerned by the international crisis because we have no sub-primes in our banks,” Abdellatif Jouhari, a Moroccan Central Bank director commented. Besides, the economy in many of them is based on the exportation of raw materials, notably fuels : being indispensable and in high demand in emerging countries, these exports are not so severely hit by US and European consumers’ declining purchasing power.

Nevertheless, because it reduces purchasing power in the US and Europe, the crisis is liable to curb exports from poor countries, Central and Eastern African experts predicted in a recent conference.- like flower exports from Kenya for instance : Kenyan export earnings are essentially generated by sales of agricultural produce. Investments are another cause for anxiety. According to a UN report published in late September, foreign direct investments in developing countries, which climbed by 21% in 2007, might fall by 10% worldwide this year. In the present climate, investors turn away from poor countries’ risky markets to seek more secure investments, with a resulting net loss in poor countries’ investment capacity.

The priority is to bail out the stock-market

ACP countries fear development aid will be the main victim of a crisis for which they have no responsibility at all. Developing countries “wonder why the extra 20 million dollars promised to Africa cannot be found when 700 billion dollars can be pumped into the financial sector,” Kemal Dervis pointed – Kemal Dervis is one of the UNDP directors (United Nations Development Program) - at the meeting organized in late September by the UN to try and boost development aid. After declining by 4.7% in 2006 and by 8.4% in 2007, public development aid might well be sacrificed in the budgets of rich countries whose main concern now is to bailout their stock markets. Even emergency humanitarian aid should be affected by declining funds in rich countries.

The probable reduction in the volume of aid is all the more worrying for ACP countries as they have already been severely hit by hikes in energy and food prices. Their already meagre budgets have been further reduced by attempts by some of them to limit the impact of those hikes on their populations by pulling down tariff barriers. The Accra conference is expected to ask rich countries to help them develop substitute fuels and reduce the impact of rocketing food prices by developing local processing units for their agricultural produce.