In a conference call Monday, Sebastian Mallaby and Benn Steil, senior
economists at the Council on Foreign Relations, said the impact of the U.S.
financial crisis will be hard on Africa's emerging markets.
Steil said he thinks they will be hit particularly hard…. “You are seeing a
flight to safety. You are seeing investors in Europe and the United States
retrenching capital…. Those falling commodities prices are obviously not going
to help at all.”
Mallaby agreed: "It seems to me that…African economies as well as other
emerging economies around the world have been feeling the effects of the ups and
downs of finance in the U.S. and other developed market. So, at the time when
commodity prices were high, mobile global capital flowed into Africa and pushed
asset prices up, and that made capital cheap…and fueled growth. And now,” he
said, “you are seeing something of the opposite cycle, as commodity prices come
down and that effect goes into reverse."
The economist said the current financial crisis is generating comparisons to
problems faced by emerging economies in the past.
Steil noted that some countries in other parts of the world probably can
weather the financial shock “much better than they might have in the 1990s. I'm
thinking in the European context of countries like Greece and Portugal and
Slovenia, that have adopted the Euro as a currency and internationally traded
currency. So, their current account deficits are no longer of concern to the
markets. In the case of Central America, interestingly enough, I think El
Salvador and Ecuador are somewhat protected from international turmoil by the
fact that they no longer have domestic vulnerable currencies and are using the
dollar as their currency."
Some analysts, including Mallaby and Steil, praised Treasury Secretary Henry
Paulson for refusing to use U.S. taxpayers' money to bail out Lehman Brothers.
They say more stringent regulations are needed in the financial market. Mallaby
explained the perspective of the two economists: "What we try to bring, which is
a little bit different to other people who comment on this crisis, is that we
are looking at the Council for Foreign Relations, the interplay between
international financial issues and US power, US policy.”Financial experts say
the financial crisis in the United States is expected to adversely affect most
African countries. A top US investment company, Lehman Brothers, filed for
bankruptcy protection Monday, sending shockwaves through local and international
financial markets. In a conference call Monday, Sebastian Mallaby and Benn
Steil, senior economists at the Council on Foreign Relations, said the impact of
the U.S. financial crisis will be hard on Africa's emerging markets. Steil said
he thinks they will be hit particularly hard…. “You are seeing a flight to
safety. You are seeing investors in Europe and the United States retrenching
capital…. Those falling commodities prices are obviously not going to help at
all.”
Mallaby agreed: "It seems to me that…African economies as well as other
emerging economies around the world have been feeling the effects of the ups and
downs of finance in the U.S. and other developed market. So, at the time when
commodity prices were high, mobile global capital flowed into Africa and pushed
asset prices up, and that made capital cheap…and fueled growth. And now,” he
said, “you are seeing something of the opposite cycle, as commodity prices come
down and that effect goes into reverse."
The economist said the current financial crisis is generating comparisons to
problems faced by emerging economies in the past.
Steil noted that some countries in other parts of the world probably can
weather the financial shock “much better than they might have in the 1990s. I'm
thinking in the European context of countries like Greece and Portugal and
Slovenia, that have adopted the Euro as a currency and internationally traded
currency. So, their current account deficits are no longer of concern to the
markets. In the case of Central America, interestingly enough, I think El
Salvador and Ecuador are somewhat protected from international turmoil by the
fact that they no longer have domestic vulnerable currencies and are using the
dollar as their currency."
Some analysts, including Mallaby and Steil, praised Treasury Secretary Henry
Paulson for refusing to use U.S. taxpayers' money to bail out Lehman Brothers.
They say more stringent regulations are needed in the financial market.
Mallaby explained the perspective of the two economists: "What we try to
bring, which is a little bit different to other people who comment on this
crisis, is that we are looking at the Council for Foreign Relations, the
interplay between international financial issues and US power, US policy.”
source: voanews.com/english/Africa/2008-09-16-voa5.cfm
