The African Financial Review July-August 2014 | Page 27

1. Exchange rates should be used to rebalance the economic growth: The African Business Review App Available now for iPad In countries where the terms of trade deteriorated, real exchange rates will have to depreciate to preserve macroeconomic stability. Countries with exchange rate flexibility should let the nominal exchange rate depreciate while keeping fiscal and monetary policies sufficiently tight to avoid devaluation –inflation spiral. 2. Need for Judicious use of the fiscal space Fiscal responses should be tailored to specific country circumstances. There may be scope for a fiscal stimulus in some countries but, in many other countries, this option may not be available due to already weakened fiscal positions and concerns regarding fiscal sustainability. In some countries, there may even be a need for fiscal consolidation. In all cases, spending plans should be cast in a medium-term context, with targeted measures to protect the most vulnerable. 3. Need to monitor the balance sheets of financial institutions Governments of African countries should identify the vulnerabilities of the banking system and plan how they will react should a banking crisis erupt. The liquidity and usability of reserve assets, the status of non-performing loans in the banking sector and the availability of trade credit deserve some particular attention. 4. Focus on Medium-term goals The gloomy environment puts an even higher premium on keeping African economies in a stable form. It is now important to make every effort to move ahead with the planned structural reforms. The current crisis should be seen as an opportunity to foster domestic consensus for urgently needed reforms in Africa. References Balogun ED (2009): ‘Determinants of West African Monetary Zone (WAMZ) Countries Global Export Trade: Do Foreign Reserves and Independent Exchange Rates Matter?’ Nigerian J. Securities Financ..14(1):61-76 CBN (2009): Statement of Account: Quarterly Report. Central Bank of Nigeria. 12:29-42 IMF (1990): The monetary approach to balance of payment. International Monetary Funds. Washington DC p.18 IMF (2009): Perspectives on Development.
 Takatoshi K (2009): What the Global Financial Crisis Means For Sub-Saharan Africa. A keynote address delivered at the 12th African Union (AU) Summit of Heads of State and Government that took place on February 3rd, 2009 in Addis Ababa, Ethiopia. Tella SA (2009): The Economic Crisis and Nigerian Stock market: Issues on Contagion. Nigerian J. Securities Financ.14 (1): 101-116. World Bank (2009): World Bank Indicators for 2009. Order your copy of The African Business Review online at www.theafricanbusinessreview.com For distribution enquiries contact [email protected] The African Financial Review | 27