US FINANCIAL CRISIS MAY BE SLOW TO HIT AFRICA-IMF

By Kevin J Kelley in New York
Daily Nation
Nairobi

October 11 2008

World financial crisis may not be felt until next year
Impact might be severe for a country like Kenya with decline in tourism
Risk of drop in remittances from Africans living in developed countries.

The financial crisis destabilising markets and economies in the developed world may not be fully felt in Africa until sometime next year, an official at the International Monetary Fund said in Washington on Friday.

“The waves that are being generated from the current crisis may wash up on African shores in the next six to eight months,” said Mark Plant, deputy director of the IMF’s Africa department.

But when the impact is felt, it could be severe for a country such as Kenya.

There is growing risk of a steep drop in remittances from Africans living in the developed world, IMF Africa director Antoinette Sayeh told reporters.

Tourism could also suffer a downturn, she warned, adding that the fund has been receiving “signals recently that developed countries may be considering decreasing their aid flows.”

Speaking to journalists at the outset of the IMF’s annual meeting, Ms Sayeh said the financial crisis will adversely affect African countries to the degree to which they are integrated into the global economy.

By that measure, Kenya could feel a significantly negative impact, due in part to Nairobi’s status as the hub for Western countries with interests in East Africa.

The Kenyan economy’s dependence on tourism may also make the country more vulnerable to the effects of a deep recession in North America and Europe.

Kenya’s commodity exports could be hurt as well. Prices for coffee and tea would fall in response to shrinking demand from hard-pressed Western consumers.

Demands for funds in their home countries could lead some European and American banks to take money out of their branches in Africa, Ms Sayeh noted.

Outsider investors, including Chinese, may reconsider projects they had planned in Africa, Ms Sayeh added. Due to the global credit freeze, “it will be more challenging for even profitable projects to receive financing in Africa,” she said.