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Economic Report on Africa 2006

Capital Flows and Development Financing in Africa

image of Economic Report on Africa 2006

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.

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Recent Economic Trends in Africa and Prospects for 2006

In 2005, African economies recorded another strong performance, continuing the momentum of strong growth achieved in 2004. The continent benefited from rising global demand for primary commodities, including oil, which resulted in high export earnings for resource-rich countries. In addition, African economies continued to reap the benefits from macroeconomic reform, which translated into consolidation of macroeconomic balances with low inflation rates, declining budget deficits, stabilization of exchange rates and improvements in current account balances.

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