African Economy One of the Term Paper

Excerpt from Term Paper :

It is believed for every dollar that flows into Africa in the form of foreign loans eighty cents flows out as capital flight. One of the significant constraints to the growth in Africa is the low savings and investment. Trade and current account deficits are another source of worry. Though overall fiscal discipline showed improvement, fiscal profligacy remains an issue. Some of the African currencies experienced massive price increases due to conflicts and political instability giving cause for concern. The adverse climatic conditions seen in 2002 had a severe negative impact on agriculture. The four key challenges that the African countries face include escaping poverty by going beyond averages; attaining fiscal sustainability and thereby exiting from dependence on aid, enthusing the African bureaucracies and thereby enhancing the capacity to deliver, and moving to mutual accountability and thereby taking the most effective path to development effectiveness. (Overview - Accelerating the Pace of Development)

Taking the year 2003 into consideration the forecast for the economy of Africa is mixed. Growth is expected to increase to about 4.2%. There are increased chances of a global slow down due to increasing oil prices, financial turbulence and the deteriorating business sentiments in the developed world. This is likely to have a significant impact on the economic growth of Africa. In addition the deteriorating political and economic conditions in countries like Zimbabwe and Ivory Coast only add to the problems for the economic growth of Africa. Recurrent floods or drought especially in the Horn of Africa could have a negative aspect on the agricultural output from Africa. (Recent Economic Trends in Africa and Prospects for 2003)

The poorest continent in the world is Africa. In the midst of all the bad news there is seen a glimmer of hope for a change for the better in Africa. A growing number of sub-Saharan African countries are putting out signs of economic growth and this has come through the better economic policies and structural reforms that these countries have undertaken. These countries have been successful in their attempts to reduce domestic and external debt by enhancing the economic efficiency. There has been a greater emphasis on public spending on areas like health care, education and the other necessary social services. There has also been a move towards democracy in this area and thereby encouraging cooperation between the state and civil society. Still domestic and external shocks cause the economic and social situation in the sub-Saharan Africa to remain fragile and vulnerable. The region has a lot to do to catch up in the ground lost over the last twenty years. Poverty is still all around despite the upswings in economic growth rates. (Promoting Growth in Sub-Saharan Africa: Learning What Works)

Investment is still low key and this reduces the possibility to diversify economic structures for boosting growth. In addition a number of these countries are just emerging from the shadow of civil wars that have been a setback for any developmental efforts. On the other hand fresh conflicts have developed in other parts of the continent. These conflicts coupled with poor weather conditions and the reduction in the terms of trade has set back the economic momentum in the region for the past two years. Therefore the countries in this region have to overcome major challenges in their attempts to raise growth and reduce poverty and join the mainstream world economy. The economic growth rates need to be raised even further if poverty is to be alleviated and enable these countries to reach the levels of the developing nations. The real requirement is for these countries to maintain sustained and substantial increase in the real per capita GDP growth rates and also improve the social conditions. (Promoting Growth in Sub-Saharan Africa: Learning What Works)

The enormity of the human toll and suffering due to HIV & AIDS is seen most in the sub-Saharan Africa, where it has become the leading cause of death. The epidemic has caused over 15 million deaths in Africa since its onset. In the sub-Saharan region in 2004 nearly 2.3 million adults and children have succumbed to AIDS. There are many countries in the region that have been unable to bring the epidemic under control and nearly two thirds of the HIV positive people in the world are seen in this region as a result, even though they hold only ten percent of the world's population. The possibility that a number of countries in the region will be locked in a vicious cycle looms high as the number of people falling ill and subsequently succumbing to AIDS has a severe impact on several parts of the African society that include demographic, household, the health and education sectors, workplaces and economic aspect. In most of the countries in which the HIV / AIDS epidemic is present there is immense pressure on the health sector. With the maturing of the epidemic the demand for care for those existing with HIV / AIDS is even more and this leads to elevated levels of death among the health workers. In this region the yearly direct costs due to AIDS is estimated to be in the region of thirty dollars per capita and this is at a time when the overall expenditure on public health is less than ten dollars for most of the African countries. The Health care services come under differing levels of pressure depending on the number of people that seek services, the nature of their requirements due to the epidemic, and finally the capacity to deliver the required care. (the Impact of HIV and AIDS on Africa)

The factors that are critical for resolving the economic crisis in Africa are health, political instability and democracy and in that order too. These articles have provided enough insight to choose these three factors as the major causes for the poor state of the economy of Africa. In the case of health, Malaria and HIV / AIDS are causing severe havoc to the economy. There are few regions of Africa that have escaped the scourge of these two diseases. Of the two the greater threat comes from HIV / AIDS. There was a time when malaria was even more rampant but control measures did ring about a reduction in its impact on the African continent. Therefore it is possible to bring about a control on the disease as well as treat those afflicted with it at a reasonable cost. The problem with HIV / AIDS is that there has been no really reliable means that have been found to treat this disease and the prevention needs the education of the population against this dreaded disease. Political instability has brought with it economic ill health to those countries where this factor is seen. The examples of Zimbabwe and Ivory Coast are enough to show that political instability can lead to severe reduction in economic growth. The introduction of basic forms of democracy in the sub-Saharan region has shown that the interaction between the state and the civic society can bring about economic gains. Should the choice of the factors be reduced to two then health and political instability remain the two most important factors in the reasons for the poor performance of the economy in Africa.

I agree with the commitment by President Bush to assist Africa in its fight with AIDS and HIV. However I would spend less time in talking and more in spending the funds towards the eradication of this scourge from Africa. Planning maybe a necessity but overextending it and expecting the execution of the plans to be implemented to the developed world's standards is aiming too high. I recommend that the money be equally divided in the treatment of the disease in keeping with WHO plan to use the antiretroviral treatment on three million people. Utilization of these funds available will only increase the scope of people that can be brought under this treatment. The next part of the money will be spent on education people on HIV and AIDS in an attempt to prevent the spread of the disease. The final part of the money will be spent on research in the search for a really effective way to treat HIV and AIDS. In this manner the hundred billion dollars will be divided into three activities and the division will be equal.

To further the economic growth in Africa restructuring reforms should be brought in place and also the prevention of the flight of capital. These articles have clearly shown that those countries that have gone in for structural reforms are in the forefront of the economic recovery seen in some countries in different regions of Africa. The flight of…

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