The International Monetary Fund (IMF) on Monday called on Africa to lay policy foundation for the continent's economic transformation, saying governance and climate change are major challenges facing the continent.
Speaking in Nairobi during a panel discussion, IMF Managing Director Dominique Strauss-Kahn said Africa also faces the twin challenges of reviving strong growth and reinforcing resilience to the economic shocks that regularly batter the continent.
"The twin challenges for Africa are to revive strong growth and reinforce resilience to shocks," he said in a speech that set the scene for a panel discussion involving Kenyan Prime Minister Raila Odinga and Finance Minister Uhuru Kenyatta in Nairobi.
Strauss-Kahn assessed the impact of the global economic and financial crisis on Africa. While noting that the crisis had struck Africa through many different channels, he said that "all across the continent, we can see signs of life, with rebounds in trade, export earnings, bank credit, and commercial activity."
The IMF chief who arrived in Kenya on Saturday will also visit South Africa and Zambia to reinforce the IMF's improved relations with the continent, talk with political and business leaders, and promote the continued transformation of Africa.
"After getting through the global economic crisis relatively well, Africa must now address longer term challenges to the continent's future, including governance issues and climate change, to be able to press ahead with the region's economic transformation," Strauss-Kahn said.
The IMF director said African countries were largely innocent victims of the global financial crisis. He said the war-ravaged continent will continue to face large, persistent and costly shocks, and these shocks will continue to cause great human suffering.
Without a secure standard of living, Strauss-Kahn said people might turn to unproductive or even violent activities, possibly leading to instability, a breakdown of democracy, or war -- all compounding the initial suffering.
"Especially in resource-rich countries, the blessings of riches can turn rapidly into the curse of conflict. Thankfully, the tide seems to have turned and all across the continent, we can see signs of a rebound -- in trade, export earnings, bank credit, and commercial activity." Strauss-Kahn said.
Although growth across sub-Saharan Africa plummeted during the global crisis to an average of two percent in 2009 from 5.6 percent the previous year, the IMF projects that it will bounce back to 4.5 percent this year and 5.5 percent in 2011.
"In short, I think that Africa is back -- although a lot depends on a global recovery that is in its early stages," Strauss- Kahn said.
The IMF chief is on a trip to Kenya, South Africa and Zambia to meet political, business, and civil society leaders and assess the impact of the global economic and financial crisis on Africa.
The panel also included environmental activist and Nobel Prize winner Wangari Maathai, rock star and political activist Bob Geldof, and Transparency International's Akere Muna.
Strauss-Kahn said that because many African countries had undertaken good policies before the global economic crisis, this had helped to inoculate them against a more severe downturn -- strengthening budget positions, reducing debt burdens, holding down inflation, and building comfortable reserve cushions.
He noted that because debt positions had improved dramatically, many countries had been able to use the budget to counteract the crisis, including preserving social spending.
Strauss-Kahn also emphasized that there was no room for complacency regarding Africa's economic outlook. "This is not the time to rest on our laurels," he said.
"Africa remains highly vulnerable to economic dislocation from many different sources. Think about swings in commodity prices, natural disasters, or instability in neighboring countries. Think about the risks that come from relying heavily on remittances, aid, and financial flows."
Strauss-Kahn said a major lesson from the crisis is that countries that sowed in times of plenty were able reap in times of loss, adding that policy buffers must therefore be rebuilt.
"Social safety nets must be strengthened -- this is the first line of defense against adverse shocks. We should also beware that widening income inequality -- across regions or segments of the population -- can aggravate tensions and make shocks more destabilizing," he said.
Strauss-Kahn also drew attention to the challenge of climate change. He called upon the international community to marshal the resources needed to help developing countries, particularly low- income countries, address this issue -- which he said could be "the shock to end all shocks".
"Without action, Africa will suffer more from drought, flooding, food shortages, and disease - possibly provoking further instability and conflict," he added.
While "some may rightly argue," Strauss-Kahn said, "that climate change is not in the mandate of the IMF .. the amount of resources needed has clear macroeconomic implications--sustainable growth in developing countries will require large-scale, long-term investments for climate change adaptation and mitigation."
He said IMF staff are working on the idea of a 'Green Fund' with the capacity to raise 100 billion US dollars a year by 2020.
He emphasized that while the IMF did not intend to manage such a fund, it aimed to offer something that "can make a significant contribution to the global debate and for consideration by the international community. And now is the time to put new ideas on the table."
Acknowledging that launching such a scheme would entail a major political effort, he also said that the "potential pay-off is enormous -- for Africa and the world."
Strauss-Kahn said transforming Africa's economy to boost living standards and increase resilience to shocks was a hefty agenda.
"Africa must take a leadership role, and I commend the stance taken by African leaders, including here in Kenya, on climate change," he said.
"Of course, the international community must also play its part. In our increasingly integrated world, a prosperous Africa is in everybody's interest. It is a two-way process."
According to IMF chief, good governance, which "begins at home," underlies all these endeavors and called on Africans to put the common good ahead of parochial concerns.
"At the same time, richer countries must not cave in to domestic political pressures at the expense of future generations and poorer countries. They must resist the temptation to reduce aid, or engage in protectionism."