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Johannesburg - The International Monetary Fund warned African countries against protectionist trade policies, advising them instead to raise borrowing to cushion their economies from the fallout of the global economic crisis.
African governments should allow their budget deficits to widen, if they can obtain the funds and cut interest rates, the Washington-based lender said in its Regional Economic Outlook report for Sub-Saharan Africa on Friday.
The IMF this week cut its 2009 growth forecast for Sub-Saharan Africa, the world's poorest region, to 1.7%, down 1.8 percentage points from the previous estimate in January and compared with growth of 5.5% last year.
The global recession has slashed demand for commodities, cutting growth in countries such as Angola, Africa's second-biggest oil producer and Zambia, the continent's largest copper producer.
"The global crisis is having a significant impact in the region, through several channels," said Antoinette Sayeh, head of the IMF's Africa department.
"Tighter global credit and investor risk aversion has led portfolio flows to reverse, deterred foreign investment and made trade finance more costly."
The IMF advised commodity exporters that have built up reserves in the past few years to draw these down gradually to help cushion their economies from the slowdown. Lower commodity prices might also help to ease inflation pressure, giving central banks room to cut interest rates to help boost consumer spending, the lender said. The IMF forecast this week that South Africa's economy, the biggest on the continent, would probably contract for the first time in 17 years this year, with gross domestic product expected to fall 0.3%.
Botswana's economy would probably contract 10.4% this year following a slump in diamond production, said the IMF. The economies of Angola, Equatorial Guinea, Namibia, Seychelles and Madagascar would probably also contract, it said.
Nigeria's economy is "severely affected" by the crisis, the IMF said, but it was not enough to destabilise the country.
The IMF aimed to double its low-interest loans to poor countries and urged international donors to meet their pledges to increase aid to Africa, Sayeh said.
- City Press/Bloomberg