By Lesley Wroughton
WASHINGTON, May 31 (Reuters) - Years after graduating from dependence on the International Monetary Fund, many African countries are having to call upon the fund for assistance to cope with a global economic crisis that is not their fault.
The international economic turmoil has been slower to reach Africa because of its limited financial links to the outside world.
But now, African economies are struggling against collapsing demand for their products, volatile commodity prices and falling foreign investment.
IMF Managing Director Dominique Strauss-Kahn describes Africa as 'an innocent victim of this global financial tsunami.'
'It did not make the mistakes of the advanced countries that are responsible for the crisis,' he said before last week's visit to West Africa. 'On the contrary, the region did many of the right things, adopting prudent macroeconomic policies and building up reserves,' he added.
The crisis has also come on the heels of last year's unprecedented rise in world food prices, which pushed more of the world's people deeper into poverty, threatened to increase social unrest and squeezed government budgets.
New IMF lending figures for Africa show that funding hit $1.6 billion in May, double the level for 2008.
Among countries seeking IMF aid are Kenya and Tanzania -- two of Africa's biggest economic reformers. The IMF on Friday approved a total of $545 million in emergency funding for the pair of East African countries.
Meanwhile, Ghana and Mozambique are in talks with the fund to secure financing support.
Other countries that have sought fresh help from the IMF in recent months include Ivory Coast, Ethiopia, Sao Tome and Principe and Zambia.
Nigeria, one of the world's biggest oil exporters, is thinking of a loan from the World Bank to help plug its widening fiscal deficit, while South Africa -- the continent's largest economy -- reported last week it is in recession for the first time in 17 years.
'We have more than 20 active programs in Sub-Saharan Africa and we have had a big increase in commitments in the first few months of this year,' IMF Director of External Relations Department Caroline Atkinson told Reuters.
She said the new aid many countries are seeking from the IMF is short term, suggesting that governments expect their economies to return to health quickly once the crisis abates.
'They have been hit by a very unfavorable global environment so they have immediate financing needs, which we expect and they expect to be temporary,' she said.
'That is why it is appropriate for them to borrow money on concessional terms in order to bridge the gap until the global economy recovers and we would expect then that their financial situation would recover,' Atkinson added.
TIME FOR NEW APPROACH
The global crisis has prompted changes in the IMF's approach to how it lends to Africa.
For example, the fund is currently exploring new lending instruments that will not require governments to tap IMF money immediately, only when they need it. The IMF has also doubled the limits of its lending for its poorer borrowers giving countries access to larger amounts of funding.
Razia Khan, regional head of research for Africa at Standard Chartered Bank, said the tightening global credit conditions were slowly affecting the real economy in Africa.
'What we're seeing now is that countries are feeling the impact of that relative drought in liquidity ... the sort of flows that a lot of African countries had relied on in the past -- whether they acknowledged it or not,' said Khan.
While it is too early to assess the damage to Africa's economy, Khan said it was important for countries to adhere to responsible policies that helped turn their economies around.
For many African countries, strict austerity measures imposed as conditions for IMF loans helped fuel eventual economic growth.
However, governments and development groups complained that the conditions often hurt the poor the most by cutting government spending for vital social programs.
Now in the midst of the global recession, the IMF has streamlined conditions and signaled that the same stimulus policies employed by the West could help in some cases in Africa, even if it means widening deficits.
At the same time, the situation requires continued devotion to policies that stimulate sustainable growth, Khan said.
'No one is arguing for very stringent austerity measures, but there is still a call for looking at what is sustainable over the medium term and for countries not to live beyond their means,' she added.
((Reporting by Lesley Wroughton; editing by Gary Crosse)) Keywords: IMF/AFRICA (lesley.wroughton@thomsonreuters.com; +1-202-898-8317; Reuters Messaging: lesley.wroughton.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, May 31 (Reuters) - Years after graduating from dependence on the International Monetary Fund, many African countries are having to call upon the fund for assistance to cope with a global economic crisis that is not their fault.
The international economic turmoil has been slower to reach Africa because of its limited financial links to the outside world.
But now, African economies are struggling against collapsing demand for their products, volatile commodity prices and falling foreign investment.
IMF Managing Director Dominique Strauss-Kahn describes Africa as 'an innocent victim of this global financial tsunami.'
'It did not make the mistakes of the advanced countries that are responsible for the crisis,' he said before last week's visit to West Africa. 'On the contrary, the region did many of the right things, adopting prudent macroeconomic policies and building up reserves,' he added.
The crisis has also come on the heels of last year's unprecedented rise in world food prices, which pushed more of the world's people deeper into poverty, threatened to increase social unrest and squeezed government budgets.
New IMF lending figures for Africa show that funding hit $1.6 billion in May, double the level for 2008.
Among countries seeking IMF aid are Kenya and Tanzania -- two of Africa's biggest economic reformers. The IMF on Friday approved a total of $545 million in emergency funding for the pair of East African countries.
Meanwhile, Ghana and Mozambique are in talks with the fund to secure financing support.
Other countries that have sought fresh help from the IMF in recent months include Ivory Coast, Ethiopia, Sao Tome and Principe and Zambia.
Nigeria, one of the world's biggest oil exporters, is thinking of a loan from the World Bank to help plug its widening fiscal deficit, while South Africa -- the continent's largest economy -- reported last week it is in recession for the first time in 17 years.
'We have more than 20 active programs in Sub-Saharan Africa and we have had a big increase in commitments in the first few months of this year,' IMF Director of External Relations Department Caroline Atkinson told Reuters.
She said the new aid many countries are seeking from the IMF is short term, suggesting that governments expect their economies to return to health quickly once the crisis abates.
'They have been hit by a very unfavorable global environment so they have immediate financing needs, which we expect and they expect to be temporary,' she said.
'That is why it is appropriate for them to borrow money on concessional terms in order to bridge the gap until the global economy recovers and we would expect then that their financial situation would recover,' Atkinson added.
TIME FOR NEW APPROACH
The global crisis has prompted changes in the IMF's approach to how it lends to Africa.
For example, the fund is currently exploring new lending instruments that will not require governments to tap IMF money immediately, only when they need it. The IMF has also doubled the limits of its lending for its poorer borrowers giving countries access to larger amounts of funding.
Razia Khan, regional head of research for Africa at Standard Chartered Bank, said the tightening global credit conditions were slowly affecting the real economy in Africa.
'What we're seeing now is that countries are feeling the impact of that relative drought in liquidity ... the sort of flows that a lot of African countries had relied on in the past -- whether they acknowledged it or not,' said Khan.
While it is too early to assess the damage to Africa's economy, Khan said it was important for countries to adhere to responsible policies that helped turn their economies around.
For many African countries, strict austerity measures imposed as conditions for IMF loans helped fuel eventual economic growth.
However, governments and development groups complained that the conditions often hurt the poor the most by cutting government spending for vital social programs.
Now in the midst of the global recession, the IMF has streamlined conditions and signaled that the same stimulus policies employed by the West could help in some cases in Africa, even if it means widening deficits.
At the same time, the situation requires continued devotion to policies that stimulate sustainable growth, Khan said.
'No one is arguing for very stringent austerity measures, but there is still a call for looking at what is sustainable over the medium term and for countries not to live beyond their means,' she added.
((Reporting by Lesley Wroughton; editing by Gary Crosse)) Keywords: IMF/AFRICA (lesley.wroughton@thomsonreuters.com; +1-202-898-8317; Reuters Messaging: lesley.wroughton.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.