‘Storm Clouds Over the World Economy’: Smith’s Lemma Senbet Discusses Implications for Africa

The recently concluded IMF-World Bank Group Annual Meetings drew policymakers and industry leaders representing about 190 countries to engage on the state of the world economy. In its coverage of the gathering, Voice of America tapped Smith’s Lemma W. Senbet to discuss the stakes for Africa.

Senbet, William E. Mayer Chair Professor of Finance at the University of Maryland’s Robert H. Smith School of Business, served from 2013-2018 as Executive Director/CEO of the African Economic Research Consortium, the largest and oldest economic research and training network in Africa.

The following is excerpted (6:00-11:12) from the Oct. 14, 2022, VOA broadcast of Africa Tonight:

VOA: The IMF is stating that Storm clouds are looming over the world economy – persistent inflation, a slowdown in China, ongoing stresses from Russia’s invasion of Ukraine, the pandemic. Based on this assessment, what is your viewpoint on the global economic slowdown?

Senbet: I’m worried that, if these crises – COVID, inflation, Ukraine, food (and fuel) – are not managed properly and contained – there is a possibility of this entire global economy evolving similarly to 1944 (when crises prompted the emergence of the IMF and the World Bank).

VOA: How will this economic slowdown affect Africa?

Senbet: The challenges facing the U.S. and other economies are also challenges facing Africa. Among the challenges are food and fuel crises exacerbated by the Ukraine crisis. And the U.S. is engaged in very tight financial policy in terms of managing interest rates to contain inflation, and this has an immediate impact on the cost of borrowing, and already we have over 20 African countries at risk of distress or default in terms of debt. Then, of course, the Ukraine war fueled food crises, so there’s a big issue of food insecurity in Africa.

VOA: What can African governments do to alleviate this problem?

Senbet: COVID-19 has become an awakening for African countries to get their house in order. There are many low-hanging fruits. For instance, there is the [African Continental] Free Trade Area Agreement in Africa now, and that is very welcome news because markets in Africa are fragmented…So, the idea of enhancing intra-trade and market integration is very welcome news. The other awakening is the need for digital transformation. We need enhanced capacity, given that markets have become very sophisticated, and (we need to enable) the youth (a demographic dividend) are increasingly becoming an engine of entrepreneurship and innovation…That’s where partners like G20, China and the U.S. are relevant. In this context, there’s going to be a summit with Biden and African heads of state, (December 13-15, 2022) in D.C., and some of these issues are going to come up. So, it’s not just about money. It’s (also) about providing technical assistance in the area of digital transformation, in particular.