International Monetary Fund has warned sub-Saharan Africa countries of a second difficult year due to such shocks as droughts and low primary commodities prices including oil and metallic minerals.
“The slowdown reflects the diverse impact of the commodity price slump in some of the larger economies and more recently the drought in eastern and southern Africa,” Antoinette Sayers, the IMF Director of the African Department said in Kampala, AllAfrica reported.
She said: “The sharp decline in commodity prices, which is a shock of unprecedented magnitude has put many of the largest sub-Saharan African economies under severe pressure especially those depending on oil.”
According to the latest Regional Economic Outlook report for sub-Saharan Africa, growth has weakened markedly by dropping to 3% in 2015, the lowest level in 15 years and is set to decelerate further in 2016.
Besides an economic slowdown in China, African growth has been adversely affected by declining crude oil prices on the international market as well those of coffee, metals, such as copper, and the strengthening of the United States dollar which has battered local currencies.
“African countries exporting oil and those intending to explore the carbon resources should not over rely on the oil resources since the market is still volatile. We advise them to diversify their economies by developing other sectors such as agriculture and infrastructure development such as power which can attract both local and foreign investors,” she said.
Leading oil-exporters, Nigeria and Angola, have been badly hit, but so have non-energy commodity exporters like South Africa, Zambia and Uganda.
Reaction
Reacting to the IMF report, Uganda’s finance state minister, Fred Omach, said the decline of oil prices will not divert Uganda from investing in the exploration of its available carbon resources.
“I agree with the report Uganda has been also greatly affected by the poor performances of the large economies such as China,” he said.
The minister said the decline of commodity prices on the international market affected the country’s earnings from exports and reduced foreign exchange earnings.
For countries like Uganda and others in the region to overcome present bottlenecks, the report advices them to do policy adjustments, rebuild their foreign exchange reserves, diversify their economies and increase domestic revenue mobilization.
During a panel discussion, Dr. Louis Kasekende, the deputy Governor of the Bank of Uganda said economic integration is crucial especially for landlocked countries.
“Regional integration is crucial for many economies on the continent especially landlocked ones. It can provide markets for exports, allow traded goods industries to achieve more optimal economies of scale and strengthen competition in markets, thereby stimulating productivity growth,” he said.
