Economic Report on Africa 2006

Capital Flows and Development Financing in Africa

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Capital flows to Africa in the form of aid, remittances and foreign direct investment have increased considerably over the past four years. However, they are unevenly distributed among countries. In addition, capital flows to Africa are highly volatile and unpredictable, increasing macroeconomic uncertainty and undermining government’s ability to design and sustain long-term development plans. The 2006 edition of the Report places capital flows at the centre of the debate on development financing and examines how external capital can help countries accelerate growth and reduce poverty.




Continuing the economic recovery since the mid-1990s, African countries generally recorded strong growth in 2005, a major turnaround after decades of economic stagnation. However, growth remains uneven across countries, and in many countries, fast growth has not been accompanied by substantial gains in employment or poverty reduction. The African continent thus continues to face challenges of achieving and sustaining higher growth rates as well as translating growth into employment and poverty reduction.


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