Africa escaped the initial effects of the financial crisis but is now feeling the dire aftershocks from the global downturn. The ultimate effects on individual countries are far from clear or consistent. The medium-term reactions of China, donor countries, and private investors are also still unknown. Yet the impact on Africa already appears to be coming through three major channels: global trade, capital flows, and policy responses. Efforts to mitigate Africa’s pain should tackle the risks in each head-on. The international community can take specific actions to address the fiscal and balance-of-payments shocks, as well as the sudden gaps in private capital. Regardless of steps taken externally, African leaders should seize the opportunity of the crisis to push through reforms that will position their economies to come out of the recession poised for renewed growth.
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