Raila sees US financial crisis affecting Africa

Tuesday October 7 2008

Kenya Prime Minister Raila Odinga addresses a

Kenya Prime Minister Raila Odinga addresses a plenary session during the 1st World Policy Conference in Evian October 6, 2008. Photo/ REUTERS 


Prime Minister Raila Odinga joined world leaders in warning on Monday that the financial crisis on Wall Street will inflict significant damage on African economies, including Kenya's.

Speaking on the sidelines of an international development conference in France, Mr Odinga told Reuters that the turmoil in world markets “will impact very negatively on the Kenyan economy in the short and medium term.”

"They say that when America sneezes, Europe catches a cold, Asia develops pneumonia and Africa's tuberculosis gets worse. This is what we are beginning to see,” Mr Odinga added.

World Bank and United Nations officials also spoke about Africa's prospects for continued economic growth.

Panic on Wall Street and in other financial centres could cause Western investors to reduce their stakes in African businesses, Shanta Devarajan, the World Bank's top economist for Africa, said in Washington on Monday.

“Now there is a risk that if there is a really difficult financial crisis in the United States and Europe and risk aversion rises, it is possible these capital flows which have fuelled growth in Africa will fall,” Mr Devarajan said.

“It will be a very, very serious problem for the continent.”

Foreign direct investment to Africa had doubled to $315 billion between 2000 and 2006, according to the Bank of America.

The cost of the crisis may also lead donor nations to scale back or abandon entirely their commitments to helping millions of Africans escape severe poverty.

UN Deputy Secretary General Asha-Rose Migiro added on Monday that the financial meltdown has put attainment of the Millennium Development Goals “clear at risk.”

“Africa remains the region with the greatest challenges ahead, particularly against the backdrop of much higher food and energy prices and climate change,” Ms Migiro said in New York. 

“We have seen some promising results, such as the reduction in Africa’s official debt.  But commitments remain only partially realised.”

Even before the financial crisis began destabilising European markets, French Foreign Minister Bernard Kouchner suggested that rich countries would focus more on their own problems and less on Africa's efforts to reduce hunger.

"To talk about development, or to talk about the millennium goals, in the middle of such a crisis, this is sort of unfair — a difficult-to-accept position," Mr Kouchar said at the United Nations last month as world leaders met to weigh progress toward achieving the goals by the 2015 target date.