The two months of conflict between Russia and Ukraine, where the “purpose of war” does not seem to have been achieved yet, have had a significant economic impact on the increasingly intertwined world economy.
Russia sees Ukraine as a simple surgery aimed at “blaming” it, giving the impression that this “special surgery” has turned into a long-running war. This raises the threat of a global recession with strategic and military upheavals, but it also brings about a renewal of international economic and financial relations.
Sanctions taken by the United States and Europe primarily to suppress the Russian economy (oil and gas bans and the exclusion of Russian banks from the Swift banking system) could discourage Russia from continuing the war. It takes time to produce an effect. In the meantime, these sanctions have led to an almost common rise in inflation in other parts of the world, due to rising costs of strategic raw materials such as oil, gas, grains and aluminum. Traditionally imported from Ukraine and Russia via Europe. Africa does not speak in a single voice in this new composition created by conflict and sanctions. However, there is an urgent need to develop strategies for predicting the new world order in which continents are emerging.
African countries that produce black gold are members of OPEC (Organization of Petroleum Exporting Countries) and are willing to uphold their policy of maintaining income in response to order and global demand. These are mainly Angola, Gabon, Equatorial Guinea, Nigeria, Republic of the Congo, Algeria and Libya. These countries are in a position to offset the rise in import bills with additional public income provided by rising oil prices generated by Russia’s sanctions on oil. Other non-producing African countries that do not have this type of external income export highly competitive products in the global market, so they feed on their own budget resources that are inadequate to “subsidize”. I am suffering from rising prices.
Rising oil prices affect the cost of energy, which, along with the cost of transportation, is rapidly introduced into the economy as a whole, resulting in additional (imported) inflation. In order to curb inflation spikes to prevent a recession, countries in different parts of the world generally raise the cost of money (interest rates) through central banks (policy rates) and distribute credit at the primary bank level. I’ve been discouraged. (Increase in interest rates applied to loans). The credit crunch is expected to slow not only business investment, where production costs are rising due to rising bank interest rates, but also private borrowing of consumer goods (automobiles, household goods, etc.).
According to BCEAO, the Bank of Canada raised its key rate by a total of 50 basis points to 1.0% in March and April 2022. Institutions will presume that Russia’s invasion of Ukraine will be a source of inflation around the world, which will have a negative impact on growth. In the CFA zone, the pace of inflation has accelerated. BCEAO, in its April 2022 Economic Note for the Allies, reports an acceleration in the rate of progress of general levels of price, “mainly by the components of’food’, and to a lesser extent. Due to the “transport” factor, inflation growth in the upcoming quarter of 2022 may accelerate.
BCEAO maintains an “adaptation” policy and BEAC raises the key rate by 50 points.
Despite the measures taken in the West to raise interest rates to combat inflation, BCEAO is in a pandemic consisting of low key rate economic support that encourages banks to lend to businesses and individuals. We continue to implement the “adaptation” policy. Not only to inject strong liquidity into the economy. Maintaining this accommodative policy benefits primarily to countries that intervene in finance and financial markets (government stock markets) to meet capital demand and to supplement budget deficits, such as businesses. ..
Meanwhile, the Bank of Central African States (BEAC) has raised its key interest rate by 50 basis points from 3.5% to 4.0% “to reduce the risk of emphasizing regional financial stability.” To BEAC’s Monetary Policy Committee because of a “weak accumulation of foreign exchange reserves” that is incompatible with the increase in imports generated by cheap bank credit.
At the monetary level, the Central African Republic’s decision to accept Bitcoin as fiat currency, similar to the CFA franc, has caused a rather unexpected phenomenon. This move reflects a recent statement by Pavel Zavalny, chairman of the Russian House of Representatives Budget and Tax Commission, that Moscow can “exchange power with friendly countries” in local currency or Bitcoin cryptocurrencies. It seems.
So far, BEAC’s monetary authorities’ reaction has not yet exceeded the verbal disapproval and other clarification requests from the Central African Government. China is also developing its own digital currency environment in RMB. This means that a centrifugal currency system is under construction compared to the dollar-based one, and the composition of world trade is changing. Previously, it was based on the United States and Europe on finance and financial issues via the euro and dollar, China and emerging countries as manufacturing bases, Russia as an energy source, fertilizers and grains, and expertise as Africa. .. Consumer market and raw material supplier.
In Senegal, subsidies for petroleum products were about 146 billion CFAF from January to June 2022, undoubtedly delaying the rise in domestic prices. The issue raised is the state’s ability to support ever-rising oil prices, such as those emerging in wars where the premise of an imminent end is hard to see.
Not “one” Africa, but “no” Africa …
According to French President Emmanuel Macron, the weight of the sanctions associated with the conflict can exacerbate our debt and cannot support budgetary subsidies during the lengthy war. Therefore, it would be desirable for peace to be restored in Ukraine as soon as possible so that Africa does not pave the way for a global recession that could not escape.
Despite its marginal position in world trade, our continent is certainly in recession due to external inflation, which disrupts most of the weak industrial structures that exist. As long as there are still “several” Africa rather than “one” Africa, African or pan-African supranational organizations must work to adapt to the new environment.
The feasibility of the African economy at this stage of the importance of fossil fuels could be based on the reorganization of Africa’s oil-producing countries (APPOs) to ensure a safer supply on a continental scale. In the context of the transition from fossil fuels to renewable energy.
Dr. Omar Farouk Ibrahim, Secretary-General of the African Oil Producers Organization, gave a new perspective on these terms. “We can’t say that there is no market because there are 1.3 billion people on the African Continent. What we need is to develop it and we produce 7 million barrels of oil every day. Is not enough and there will be no export issues. Of course, if Africa is known to be the “net” importer of petroleum products, this all includes investment matching. Europe, the United States, Russia, China, and emerging economies are redrawing a new world map of their raw material supply chains.
Africa should not be excluded