Developing countries have started to be hit by the third wave of economic crisis as many experts expected. Tanzania particularly has seen her revenue sharply dropping and reports are out that she is seeking financial assistence to IMF, the Tanzania President Jakaya Kikwete during his May Day Speech revealed that Tanzania has lost 255 billion shillings in revenue and that the figure is expected to raise 488 billion by the end of the year because of the global economic crisis.
Technically the financial crisis is going to hit developing countries through two channels, namely Trade Channel and Finance Channel. Trade channel, as demand for consumption in developed countries has dropped this will affect exports mainly from developing countries which supply products that are elasticity sensitive. High income earners in developed countries already have their expenditure on luxury items like jewery reduced. This will reduced/decreased exports earnings of low income countries, and therefore affect Governments abilities in providing social services like medicines, schools and improving social infrastructure. It is important during this hard times, Governments in developing countries take immediate measures to invest in social infrastructures that are accessible to lower income earners in these countries. The measures taken by the Government of Tanzania by abolishing importation of luxury cars and seminars are good examples of pro-poor measures. The money to be saved will be invested in agriculture and according the information revealled by the Prime Minister Mizengwe Pinda, other saved money from vihicles are diverted to buying hospital ambulances, to improve health services provision to rural areas.
The finance channel will results to reduced credit flow to poor coutries and will cause many projects under implementation to be abandoned because of lack of funds and planned projects to remain in the books. This is because lenders in the north are not able provide credit and banks are survaving on Government bailled out funds which are implicitly imbeded with protectionism with the purpose of safeguarding employment in the north. The will results into massive unemployement in the South, for example the American bail out is containing the buy American clause, meaning that the bail out money are prevented to flow to other economies.
Governments in the South (developing countries) with the little resources at their disposal should be able to prudently invest in public and social infrastructure in order to improve their competitiveness and provide safe nets to pro-poor sectors. Furthermore, investment policies should target investments in sectors that are crisis proof and investment in dynamic products. Dynamic products have been proved also to be crisis proof, that is attract investments in IT and IT parts, compturer parts, investment in call centres and information technology in general.
Other sectors that are crisis proof are investment in services sectors, investment in logistics and overseas call centres.
Technically the financial crisis is going to hit developing countries through two channels, namely Trade Channel and Finance Channel. Trade channel, as demand for consumption in developed countries has dropped this will affect exports mainly from developing countries which supply products that are elasticity sensitive. High income earners in developed countries already have their expenditure on luxury items like jewery reduced. This will reduced/decreased exports earnings of low income countries, and therefore affect Governments abilities in providing social services like medicines, schools and improving social infrastructure. It is important during this hard times, Governments in developing countries take immediate measures to invest in social infrastructures that are accessible to lower income earners in these countries. The measures taken by the Government of Tanzania by abolishing importation of luxury cars and seminars are good examples of pro-poor measures. The money to be saved will be invested in agriculture and according the information revealled by the Prime Minister Mizengwe Pinda, other saved money from vihicles are diverted to buying hospital ambulances, to improve health services provision to rural areas.
The finance channel will results to reduced credit flow to poor coutries and will cause many projects under implementation to be abandoned because of lack of funds and planned projects to remain in the books. This is because lenders in the north are not able provide credit and banks are survaving on Government bailled out funds which are implicitly imbeded with protectionism with the purpose of safeguarding employment in the north. The will results into massive unemployement in the South, for example the American bail out is containing the buy American clause, meaning that the bail out money are prevented to flow to other economies.
Governments in the South (developing countries) with the little resources at their disposal should be able to prudently invest in public and social infrastructure in order to improve their competitiveness and provide safe nets to pro-poor sectors. Furthermore, investment policies should target investments in sectors that are crisis proof and investment in dynamic products. Dynamic products have been proved also to be crisis proof, that is attract investments in IT and IT parts, compturer parts, investment in call centres and information technology in general.
Other sectors that are crisis proof are investment in services sectors, investment in logistics and overseas call centres.
No comments:
Post a Comment