DAKAR – The world economic downturn and financial-market tremors have strained budgets across Africa. With the exception of Ghana, and a few other states, in 2009 most African countries’ fiscal balances deteriorated. But, thanks to prudent management of public finances during previous periods of robust growth, a significant number of African countries have endured the current crisis in better fiscal shape than during past crises.
In 2009, aggregate GDP growth in Africa averaged 1.6%, down from about 5.7% during the 2002-2008 period – but growth all the same. Moreover, several African countries continued to implement long-term reforms to improve their business and investment climate, despite the daunting challenges presented by the crisis. Now that international trade and global industrial production are on the mend, sub-Saharan economies look set for more robust growth, as demand for and prices of oil and other minerals rebound and general economic activity resumes.
Of course, numerous downside risks – adverse weather shocks, military conflict, and political turmoil – still can undermine the hard-earned benefits of this social and economic record. But it is the dichotomized nature of their economies and finances that represents Africa’s most intractable structural imbalance. Frankly, two Africa’s are emerging: a modern economy and a cash-based economy.
Across Africa, almost all governments praise – some honestly, some not – economic modernization as the cornerstone of prosperity and the yardstick by which their effectiveness should be measured. Many boast of the modernity of the financial infrastructure of their economies, which is based on an entire set of legal, regulatory, accounting, credit reporting, and payment and settlement systems.