Reposted from The Guardian –
The challenge for policy-makers is to set a course for recovery that supports more inclusive growth, while preparing the ground for an economic transformation.
Meeting that challenge in the midst of an economic downturn will not be easy. Having ridden the wave of the commodity super-cycle, Africa has been hit hard by the slump in oil and metal prices. Dependent on oil for 70% of government revenue, Nigeria has been forced to turn to the World Bank and the African Development Bank for an emergency loan to plug an expanding budget deficit. Weak commodity prices are magnifying already unsustainable fiscal deficits in Ghana and Zambia.
Eurobond markets that two years ago looked like a source of ‘cheap money’ are delivering their own verdict. The combination of currency devaluation, shrinking foreign exchange buffers and slower growth has pushed typical yields on African bonds from 3-4% two years ago to 8-9% today.
Real as the immediate costs of adjustment are, they should not deflect attention from the deeper failures. While economic output has doubled over the past fifteen years, poverty incidence has fallen modestly – from 57% to 42% – and the number of poor has risen with population growth.