IMF warns of slow African growth

Dominique Strauss Kahn on his first day in Tanzania

The International Monetary Fund (IMF) has warned that Africa's economic growth will be affected by the continuing world downturn.

It predicts that growth in sub-Saharan Africa will slow to 3.25% in 2009, half the growth rate it previously thought.

The slump in commodity prices and the credit squeeze are the main culprits, the IMF said.

The report comes ahead of a major IMF conference on Tuesday in Dar-es-Salaam, Tanzania, to discuss how to respond.

The conference will discuss what external support the IMF and other Western donors may be able to provide to help mitigate the impact of the crisis on Africa, which has the highest poverty rate of any region in the world.

The IMF's managing director, Dominique Strauss Kahn, told the BBC that the conference would be a "milestone" and that he wanted to build a different kind of partnership with Africa, as well as providing additional funds.

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In recent years, many African countries have enjoyed strong growth rates, boosted by rising commodity prices, including oil.

"The gains of the past decade, during which many countries in sub-Saharan Africa saw sustained high rates of economic growth and rising income levels, are at risk," said Antoinette Sayeh, the IMF's African department director.

Less than a year ago, the IMF's forecast for sub-Saharan Africa was economic growth of 6.7% in 2009, an increase on the 5% growth enjoyed in 2008.

Now the low growth forecast means that many African countries are likely to see very little increase in living standards, and could fall further behind in meeting poverty targets.

It says that 15 of the 21 countries which it judges most vulnerable to the crisis are in Africa.

Widespread impact

The IMF says that many countries will not have the funds to protect the poor from the effects of the downturn and may need external help.

The fall in the global price of copper has hit Zambia

"While African policymakers are rising to this unexpected challenge, donors must also play their part. They must maintain their commitments and scale up, not scale back their support," it says.

Africa has little direct exposure to the credit crisis. Its banks have not invested much, if at all, in the problem financial assets at the heart of the crisis.

But the global downturn has undermined demand for many industrial commodities, which are important exports for several African countries. - including oil in Nigeria, Angola and Equatorial Guinea, and copper in Zambia.

Africa is also likely to be hit by reduced financial flows from abroad, including fewer remittances and less foreign direct investment.

However, providing more aid could prove controversial.

The IMF itself is expected to ask for a substantial increase in its funding at the G20 summit of world leaders in London next month.

But it is not certain such additional funds will be forthcoming.

As the IMF itself points out, historically foreign aid declines during an economic downturn.