Europe crisis is stifling remittances to East Africa, Central Bankers Say

BY BUSINESS REPORTER AND AGENCIES

EAST Africans are sending less money back to their home countries as the crisis in the euro region slows global economic growth, government officials from Burundi, Tanzania and Uganda said.

“The European crisis has an impact on our region because the union is an important partner for us,” Gaspard Sindayigaya, governor of Burundi’s central bank, said in an interview today at Bloomberg’s headquarters in New York. “There has been a decrease in term of the remittances. We’re monitoring the possible impact particularly in the area of budget adjustments,” he said.

African economic growth slowed to 2.7 percent in 2011, from 5 percent in 2010, and the continent may face “serious” threats this year because of the situation in Europe, according to the Economic Commission for Africa. Growth excluding North Africa was 4.5 percent last year, steady from 2010, the Addis Ababa-based United Nations agency said in a statement distributed to reporters in the Ethiopian capital today.

 

“The current account transactions from Europe are a major source of capital for us,” Louis Kasekende, the deputy governor of the Bank of Uganda, said in an interview. “There’s always an issue of capital relocated out of emerging markets and back to the safe havens and that is something that we will have to face.”

Economic growth in Africa also slowed last year after uprisings in Tunisia, Egypt and Libya, the Economic Commission said.

Biggest Partner

Europe is Africa’s biggest economic partner and any slowdown there may curb trade flows, remittances, investment, tourism and donor funding, the Commission said. Efforts to deflect some of the impact of the euro zone crisis by diverting exports to emerging economies are being stymied by slowing growth in economies including Brazil, China, India and Mexico, according to the report.

“Africa’s prospects for 2012 would seem encouraging, but given current global economic uncertainty, I would urge continuous vigilance as the signs are ominous and we may face serious threats,” Abdoulie Janneh, executive secretary of the Commission, said in the statement.

The African Development Bank estimates that a one percentage point decline in the gross domestic product of Organization for Economic Cooperation and Development countries translates into a decline of about 0.5 percent in African GDP and a 10 percent drop in the continent’s export earnings, according to the bank’s website.

African heads of state will begin meeting in Addis Ababa on Jan. 29 to discuss ways to boost trade between countries on the continent. Intra-regional trade currently stands at an “abysmally low” 11 percent of the total, according to the Commission.

Increased trade within the continent would boost consumer demand, stimulate investment and promote food security by facilitating the movement of food from surplus countries to those facing deficits, Janneh said.