The ongoing plunder of Africa’s natural resources drained by capital flight is holding it back yet again. More African nations face protracted recessions amid mounting debt distress, rubbing salt into deep wounds from the past.
With much less foreign exchange, tax revenue, and policy space to face external shocks, many African governments believe they have little choice but to spend less, or borrow more in foreign currencies.
Developing countries have long been told to avoid borrowing from central banks (CBs) to finance government spending. Many have even legislated against CB financing of fiscal expenditure.
Central bank fiscal financing
Such laws are supposedly needed to curb inflation – below 5%, if not 2% – to accelerate growth. These arrangements have also constrained a potential CB developmental role and government ability to respond better to crises.
Held in-person for the first time in three years, the annual meetings of the International Monetary Fund and World Bank last week in Washington, D.C. failed to offer solutions to the dozens of developing countries in debt distress or on the forewarned global recession instigated by monetary tightening.
Widespread adverse reactions to the UK government’s recent ‘mini-budget’ forced new Prime Minister Liz Truss to resign. The episode highlighted problems of macroeconomic policy coordination and the interests involved.
Finance ministers of the G20 and the world met in Washington, October 10-16, to discuss how to navigate multiple crises, including rising cost-of-living, broken global supply chains, climate shocks, and the lingering COVID-19 pandemic.
Developing low- and middle-income economies are taking hard hits from global economic developments outside their control. Monetary tightening in advanced economies coupled with increasing fears of a global recession have weakened currencies, sent interest rates soaring, and investors fleeing.
Preoccupied with enhancing their own ‘credibility’ and reputations, central banks (CBs) are again driving the world economy into recession, financial turmoil and debt crises.
In the last week of September, emerging market (EM) bond fund outflows hit $4.2 billion, according to JP Morgan, bringing this year’s total to a record $70 billion. The exodus, set off by a rising U.S. dollar, is heaping pressure on low-income countries.
The dogmatic obsession with and focus on fighting inflation in rich countries are pushing the world economy into recession
, with many dire consequences, especially for poorer countries. This phobia is due to myths shared by most central bankers.
Central banks (CBs) around the world – led by the US Fed, European Central Bank and Bank of England – are raising interest rates, ostensibly to check inflation. The ensuing race to the bottom is hastening world economic recession.
Inflation phobia among central banks (CBs) is dragging economies into recession and debt crises. Their dogmatic beliefs prevent them from doing right. Instead, they take their cues from Washington: the US Fed, Treasury and Bretton Woods institutions (BWIs).
Policymakers have become obsessed with achieving low inflation. Many central banks adopt inflation targeting (IT) monetary policy (MP) frameworks in various ways. Some have mandates to keep inflation at 2% over the medium term. Many believe this ensures sustained long-term prosperity.
As rich countries raise interest rates in double-edged efforts to address inflation, developing countries are struggling to cope with slowdowns, inflation, higher interest rates and other costs, plus growing debt distress.
Venezuela is preparing to replicate the experience of Special Economic Zones (SEZs), a mechanism with which more than 60 countries have tried to draw investment and accelerate economic growth, while under its avowedly socialist government a "silent neoliberalism" is gaining ground.
Most sub-Saharan African French colonies got formal independence in the 1960s. But their economies have progressed little, leaving most people in poverty, and generally worse off than in other post-colonial African economies.
Pre-Second World War colonial monetary arrangements were consolidated into the Colonies Françaises d’Afrique
) franc zone set up on 26 December 1945. Decolonization became inevitable after France’s defeat at Dien Bien Phu in 1954 and withdrawal from Algeria less than a decade later.
The ominous warnings keep coming non-stop: some of the world’s developing nations, mostly in Africa and Asia, are heading towards mass hunger and starvation.
The World Food Programme (WFP) warned last week that as many as 828 million people go to bed hungry every night while
the number of those facing acute food insecurity has soared -- from 135 million to 345 million -- since 2019. A total of 50 million people in 45 countries are teetering on the edge of famine
We are in the toughest period the world economy has faced since the creation of the multilateral system more than three-quarters of a century ago. A quadruple shock of COVID, climate change, conflict and cost-of-living has undone years of hard-fought development gains.
Half a century after the 1970s’ stagflation, economies are slowing, even contracting, as prices rise again. Thus, the World Bank warns
, “Surging energy and food prices heighten the risk of a prolonged period of global stagflation reminiscent of the 1970s.”
In March, Reuters reported
, “With surging oil prices, concerns about the hawkishness of the Federal Reserve and fears of Russian aggression in Eastern Europe, the mood on Wall Street feels like a return to the 1970s”.
The world economy is on the brink of outright recession, according to the International Monetary Fund
(IMF). The Ukraine war and sanctions have scuttled recovery from the COVID-19 pandemic.
Colonial-style currency board arrangements
have enabled continuing imperialist exploitation
decades after the end of formal colonial rule. Such neo-colonial monetary systems persist despite modest reforms.
Darío is a locksmith in Flores, a traditional middle-class neighborhood in the Argentine capital, who will have to stop working in the next few days. "Suppliers have suspended the delivery of locks, due to a lack of merchandise or because of prices," he laments. His case is an illustration of an economy gone mad in a country that once again finds itself on the brink of the abyss.