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Africa must better insulate from Fed shocks, Uganda banker says
African nations bearing the brunt of food insecurity and the negative effects of the Federal Reserve’s rate hikes must bolster their resilience against future external shocks, according to the Bank of Uganda’s deputy governor.
“Africa is an innocent bystander and is being badly hit,” Michael Atingi-Ego said in an interview in Washington Friday. “It’s high time we, as Africans, come with our own solutions because it looks like these shocks are going to become more frequent and the intensity is going to become stronger.”
The Federal Reserve’s most aggressive monetary-policy tightening since the early 1980s has sent the US currency surging, heightening debt risks for developing countries that borrowed heavily in greenbacks and effectively locking some out of capital markets. It’s also raising the cost of dollar-priced energy and food imports particularly in sub-Saharan Africa, where floods and droughts are adding to price pressures induced by Russia’s war in Ukraine.
Atingi-Ego’s comments highlight differences in opinion among some of Africa’s top central bankers who’ve either backed the Fed’s attempts to cool inflation or criticized it for failing to take the impact of its actions on developing markets into account.
South Africa’s Lesetja Kganyago said this week that Fed inaction could lead to bigger costs down the line while Kenya’s Patrick Njoroge warned that the spillover effects for emerging markets will have costly spillback consequences.
“The Fed has got an obligation to the US so now we need to ask ourselves: ‘how do we increase our resilience to some of these exogenous shocks?’” said Atingi-Ego, who has led the Bank of Uganda since Emmanuel Tumusiime-Mutebile, Africa’s longest-serving central bank governor, died in office in January. “So, what can we learn from this so that we can mitigate future shocks? Otherwise, we’ll continue crying.”
Uganda is focused on building resilience through boosting local production, promoting value addition, expanding its export base and seeking to take advantage of regional trade opportunities presented by the African Continental Free Trade Area, he said.
African countries should also work together to mitigate the impact of climate change that’s affecting food crop inflation particularly in sub-Saharan Africa, the world’s most food insecure region, and “conserve our environments so that we’re not affected by the vagaries of weather,” Atingi-Ego said.
The East African central bank flagged the impact of adverse weather conditions on food production as a risk to its inflation outlook Oct. 6, when it raised its key interest rate to the highest level since 2019. Headline inflation is expected to peak in the second quarter of 2023 and return to the central bank’s medium-term target of 5% a year later, Atingi-Ego said.
Uganda’s successes in handling outbursts of the Ebola virus and strong surveillance systems mean it has the capacity to deal with a current outbreak, he said. The Sudan virus, one of the pathogens known to cause the Ebola virus disease, was detected in Uganda on Sept. 20. As of Oct. 12, the government reported 54 cases and 19 deaths in five districts in the country’s central and western regions.
