GLOBAL SCENE
Western financial crisis to affect Africa's economic growth
The current financial crisis affecting western countries is likely to
affect Africa's economic growth if the continent does not look for
alternative markets, a top financial official warned here on Tuesday.
Ugandan Finance Minister Ezra Suruma told his counterparts from the
Common Market for Eastern and Southern Africa (COMESA) members that
Africa's exports to the United States and Europe are likely to be
affected because the people there will have low purchasing power.
"We have to find alternative markets for our products," said the
minister. He added one option is to increase their exports to Asian
countries, which hopefully will not be deeply affected. Africa, through
the African Growth Opportunity Act (AGOA) and the Everything But Arms,
exports its products to the United States and the European Union markets
tariff and quota free respectively.
According to official figures, Africa's exports to the United States
under AGOA tripled to 67.4 billion dollars in 2007. Suruma told the
ministers who were attending a one-day annual meeting of the region's
bank, Preferential Trade Area Bank, that the crisis has proved that the
concept of capitalism has to be revised.
"Capitalism is not likely to be the same again; the role of
regulation by governments is perhaps inevitable. We should brace
ourselves for a new world order," he said.
The minister however said as governments revise capitalism, the
concept of free market economy should not be totally abandoned.
Mohit Dhoorundhur, chairman of the Board of Directors of the bank,
said the impact of the crisis on African economies is still
unpredictable though some analysts have said that the continent's
financial markets do not have the depth and width of the west to be
affected.
"The challenge for the bank, in member states, in fact for the whole
of African region is to recognise the need for change and be determined
to undertake rapid reforms while the crisis is still at a distance," he
warned.
Kampala, Xinhua
Nepali central bank announces tight monetary policy
Nepal Rastra Bank (NRB), the central monetary authority of the
country, said Tuesday it is adopting a cautiously tight monetary policy
designed to achieve price stability without hurting growth prospects.
The monetary policy for the Fiscal Year 2008/09 unveiled Tuesday
acknowledged that rising prices was the biggest monetary challenge, and
it has vowed to curtail it by taming monetary expansion.
In this regard, the central bank has raised the bank rate, the
interest it charges on loans it extends to commercial banks, by 25 basis
points to 6.5 percent.
Likewise, the newly unveiled monetary policy has also increased the
Cash Reserved Ratio (CRR) on local currency deposits to 5.5 percent from
the existing 5 per cent. The change in the CRR rate is expected to mop
up 1.92 billion Nepali rupees (some 25.9 million U. S. dollars) worth of
liquidity, stated the policy. The monetary policy has raised a red flag
at unnaturally rising housing and share prices, and warned that they
might trigger a serious financial crisis if their prices start dropping.
As the banking system has made huge investments in real estate and
the share market, the monetary policy has noted that any reversal in the
excessively rising prices could put the entire banking system in
trouble. The newly announced budget by the government has also required
house, land and vehicle buyers to disclose their sources of income if
the transaction exceeds a certain amount.
The new policy predicts that average annual inflation will remain at
7.5 percent in the current fiscal year. It aims to achieve a surplus
balance of payment worth 12 billion rupees (some 162 million dollars) in
order to ensure adequate foreign exchange reserves to pay for a half
year's imports. The policy has also announced that the central bank will
establish a credit rating agency and arrange to provide certificates to
those having a good credit rating.
Likewise, in order to promote competitiveness of export- oriented
industries, the policy has reduced the export refinance rate to 2
percent from 2.5 percent. Commercial banks will not be allowed to charge
interest at a rate higher than 5 percent on such loans.
Kathmandu, Xinhua |