The two months of the Russia-Ukrainian confrontation, the “goals of the war” that seem to have not yet been achieved, are yielding significant economic effects on the world economy that are gradually intertwined.
Seen by Russia as a short surgical operation intended to “denazify” Ukraine, this “special operation” gives the impression that it will be a long-term war. This raises fears of a global economic downturn accompanied by geostrategic and military turmoil, but also a renewal of international economic and financial relations.
Sanctions made in response by the United States and Europe primarily to curb Russia’s economy (oil and gas embargo, and exclusion of Russian banks from the Swift banking system) have been slow to produce effects that are likely to deter Russia. in the continuation of the war. Meanwhile, these sanctions have led to an almost general increase in inflation in other parts of the world, due to the increasing value of strategic raw materials such as oil, gas, cereals, aluminum, etc. traditionally imported from Ukraine and Russia via Europe. In this new adjustment generated by conflict and sanctions, Africa is not speaking with one voice. However, it is urgent that the continent develop a strategy to anticipate the new order in the emerging world.
African countries that produce black gold, because they are members of OPEC (Organization of the Petroleum Exporting Countries), are happily defending a policy of maintaining their revenues in accordance with order and global demand. These are mainly Angola, Gabon, Equatorial Guinea, Nigeria, Republic of Congo, Algeria and Libya. These countries are in a position to compensate for the increase in their import charges of additional public revenue offered by the increase in oil prices generated by sanctions against Russia’s oil. Other non-producing African countries with no external revenues of this kind, because they export products that are highly competitive in the global market, are experiencing rising food prices with their own budget resources insufficient to “subsidize”.
Rising oil prices affect the amount of energy that, along with the cost of transportation, is quickly translated into the entire economy, causing further (imported) inflation. To control the rapid rise of inflation to prevent an economic downturn, countries in different parts of the world usually raise the value of money (interest rates) through their central banks (policy rates). ), to prevent the distribution of credit at the level of major banks (increasing interest rates applied to loans). The credit crunch is expected to slow down business investment, with production costs rising due to rising bank interest, but also private borrowing for consumer goods (cars, household appliances, etc.). .
According to BCEAO, the Central Bank of Canada, in March and April 2022, raised its core rate on a total of 50 basis to bring it to 1.0%. The institution estimates that Russia’s invasion of Ukraine will be a source of inflation anywhere in the world with a downward impact on growth. In the CFA zone, the upward pace of inflation has accelerated. The BCEAO, in its Economic Note for the Union countries of April 2022, reports an acceleration in the rate of growth of the overall level of prices, driven mainly in part by “Food products” and, at a lower level.by the “transportation” component, and a possible acceleration in the rate of inflation rate increase for the coming quarter of 2022.
BCEAO maintains its “accommodation” policy while BEAC raises its base rate by 50 points!
Despite measures taken in Europe and the United States to raise interest rates to combat inflation, BCEAO continues its “accommodation” policy implemented during the pandemic, consisting of support for economies. through low key rates that encourage banks to lend to businesses and individuals, but also to inject strong liquidity into the economy. Maintaining this cooperative policy primarily benefits States that, like corporations, are interfering in the financial and financial markets (government security markets) for their capital needs and to cover shortfalls. on budget.
On the other hand, the Bank of Central African States (BEAC) raised its key rate by 50 basis from 3.5% to 4.0%, “to contain risks weighing on financial stability in the region”, but also, according to to the Monetary Policy Committee of the BEAC, due to a “weak accumulation of foreign exchange reserves” that could not keep pace with the increase in imports that would generate cheap bank credit.
At the monetary level, an unexpected event occurred with the decision of the Central African Republic to accept Bitcoin as legal tender in the same way as the CFA Franc. The move appears to echo recent statements by Pavel Zavalny, head of the Russian House of Representatives Budget and Taxation Committee, that Moscow could conduct a power exchange in the local currency or Bitcoin cryptocurrency in “friendly countries.
So far, the reactions of the BEAC financial authorities have not exceeded verbal disapproval and other requests for explanation from the Central African government. China is also creating its own digital monetary environment with e-yuan. This means that centrifugal monetary systems versus a dollar -based one are under construction, as well as a change in the regulation of world trade. That until then has been based on specializations, such as the United States and Europe for monetary and financial matters through the euro and the dollar, China and emerging countries as a manufacturing base, Russia as an energy source, fertilizers and cereals, and Africa as a consumer market and supplier of raw materials.
In Senegal, subsidies on petroleum products amounted to approximately CFAF 146 billion from January to June 2022, which undoubtedly contributed to the slowdown in rising domestic prices. The question is the state’s ability to support the continuing rise in oil prices as it emerges in a war that the area of an imminent end is slow to see.
“An” Africa but instead “of” Africa …
The weight of conflict -related sanctions could exacerbate the indebtedness of our States, which cannot afford to support budget subsidies during a war that is set to be long, according to French President Emmanuel Macron. It is therefore desirable to restore peace as soon as possible to Ukraine, so as not to pave the way for a global recession from which Africa cannot escape.
Despite its marginal position in global trade, our continent is actually falling into economic recession due to external inflation that will end up disorganizing the weak industrial fabric that exists for the most part. As long as there is no “one” Africa but rather “some” Africa, African or pan-African supra-national organizations must work to adapt to a new environment.
The viability of Africa’s economies, at this stage of the importance of fossil fuels, should be based on the restructuring of Africa’s oil -producing countries (APPO), to ensure a safer supply on the size of the continent. , in a context of the transition from fossil fuels to renewable energies.
Dr Omar Farouk Ibrahim, Secretary General of the Organization of African Petroleum Producers, spoke about the new insights in these terms: “Given 1.3 billion people on the African continent, we can’t say we don’t have a market. What we need is develop it and we will see that the 7 million barrels of oil we produce every day is not even enough and there is no question of export.All this, of course, requires matching investments, if we know that Africa is a “net” importer of petroleum products.Europe, USA, Russia, China and emerging countries are once again drawing a new global map of raw material supply chains.
Africa must not be left