The United Nations Economic Commission for Africa (ECA) has called on African governments to pay attention to the diversification of their economies to avoid the effects of unprecedented conditions such as COVID-19.
Mr. Bartholomew Armah, Head of the Planning Renewal Section of the ECA Economic Policy Division, called for a virtual presentation in Addis Ababa on the report “Food Trends and Analysis in the Consumer Basket”.
The report, which has just been published, was drafted through the African Statistics Centre and the ECA’s Division of Economy and Governance.
Armah said governments want to diversify their economies to the negative effects of conditions such as the existing pandemic on inflation rates in countries.
He said inflation rates in several African countries also had a negative effect on exchange rates.
“Why are our exchange rates so volatile and affected by COVID?
“The answer is that our economies are equally diverse, so whatever happens with one or two products we sell, our exchange rate is going down. “
He said imports were affecting the exchange rate and inflation of African economies.
“The link between the exchange rate and inflation is twofold; it is direct, so regardless of which countries buy or import from abroad, the value will be lost.
“There is also an indirect effect. Even if it communicates about local food, if countries import fertilizers, the fertilizer load will increase; this means that, as an input in cassava production, cassava also charges for fertilizers.
“So we want to diversify our economies to protect ourselves from these shocks in our exchange rate, and that’s simply because those rates have an effect on costs and what affects costs affects people’s livelihoods.
“In an unprecedented scenario such as COVID-19, countries are piling up on other challenges, such as the inflation challenge, as well as the challenge of unemployment and livelihoods.
“If, as a country, you have not paid attention to diversification in the past, now is the time and an explanation of why to pay more attention to it,” he said.
Armah said almost some countries had high inflation rates in 2020 until the last quarter of 2019, according to the report.
He said the report showed that where inflation had been lower, many countries had seen a slight decline since 2019.
According to him, the report revealed that food costs were the main driver of inflation in peak African countries, as indicated by the Consumer Price Index (CPI).
According to the report, nine countries have noticed an increase in food costs of more than 10, consistent with the penny.
“It is vital to note that food costs are for imported and domestically produced foodstuffs and points where costs will vary, as imported food products are more likely to be affected by inflation and exchange rate points,” Armah said. .
The report also indicated that food accounted for 30 per cent of customers’ baskets in up to a maximum of countries.
“So what happens to the food component of the CPI says a lot about what the CPI will do in general,” the ECA representative said.
In addition, the report indicates that non-alcoholic foods and beverages account for a portion of the customer basket in many countries.
It noted that representation exceeded 50% in thirteen countries and more than 30% in 27 countries.
Armah, however, explained that food is a good that other people cannot do without.
“What happens to food costs has implications for poverty and at a time of COVID when other people are already unemployed, this can mean that signs of poverty can be affected by what is in the CPI. “
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