- African investment could be hit by the global financial meltdown

African investment could be hit by the global financial meltdown

BBC - October 24, 2008

Ethiopia's inflation rate is as high as 60%. Several African countries are suffering signs of macroeconomic imbalances quite independent of the financial crisis.

We at the World Bank think that the effects of the global economic crisis on Africa will be at least fourfold.

First, there could be fall-out within the banking system because of foreign ownership. If a parent bank in the US or Europe is suffering, it might have an effect on a bank in Africa.

We do not think, however, that African banking systems are going to suffer the kind of turmoil that the US and European banking systems have been suffering. African banks tend to keep their loans on their own balance sheets; there is a very small secondary market; and the market for derivatives is almost non-existent. The second and biggest effect is going to be the potential decline in private capital flows. Read More.