Patrick Smith, the editorial director of Africa Confidential, has said demands from African governments to the International Monetary Fund (IMF) and the World Bank are going to go up.
He said this would test the Bretton Woods institutions’ ability to have enough money to deal with the crisis.
Speaking with Nana Yaa Mensah on Sunday Night on Asaase 99.5 Accra, Smith said, “… I think the demands are going to go up from Africa to the IMF and the World Bank. And this brings some real question as to whether the IMF and the World Bank have enough money to deal with this crisis.”
“So that’s the international dimension of it. There is a shortage of capital to the developing world. And the context for that is; since the beginning of the year, there has been a massive outflow from developing economies back into the rich economies … and that has been turbocharged by the Federal Reserves’ decision to push up the interest rate and then every Western central bank has followed that decision,” he said.
“And that is drawing capital back into the rich industrialised economies and creating a capital shortage in developing economies.”
With this scenario, Smith said there must be some systematic intervention from the Bretton Woods institutions to help curtail the negative effect of the crisis on developing economies.
“So, there must be some intervention from the IMF and the World Bank … there has to be some system intervention to change that.”
He added, “That’s going to have a very negative effect on the developing world economies.”
However, he said there is a lot of money within Africa and the question is; trust, integrity and good management adding that “with this Africa’s development will boom.”