Sub-Saharan Africa was largely insulated from the initial stages of the financial crisis. With the worsening of the crisis, however, the region as a whole has now been exposed to the downturn. The countries most affected are those whose economies are highly specialised in the affected industries, especially when combined with pre-existing poor governance and weak state institutions.
The drop in commodity export prices has resulted in a loss of foreign exchange, deteriorating current account balances, declining reserves and a reduction in government revenues. There are grave concerns that governments will be unable to provide the necessary social safety nets, and may also cut back on spending on social services and infrastructure.
The combination of drops in real wages, unemployment and decelerating remittances are putting severe strain on poor households. There are already reports of inadequate income for food and other necessities, increasing malnutrition and susceptibility to illness and disease.
There are also concerns for social and political stability. A potential decline in service provision and rising unemployment may result in a loss of confidence in government. Countries that already suffer from poor governance and weak state institutions, and/or have been emerging from conflict, are at particular risk of instability.
