Africa aid wiped out by rising cost of oil

The rising cost of oil has wiped out the benefits many African countries were expecting from western aid and debt relief over the past three years, new research from the International Energy Agency has shown.

The situation is raising fears that, in spite of the strong growth many African countries have seen in recent years, there could be a repeat of the 1980s debt crisis in the developing world that was caused in part by the oil shocks of the 1970s.
Africa enjoyed a surge in western engagement during the UK’s presidency of the Group of Eight leading industrialised countries, culminating in a commitment by world leaders to a broad package of debt relief and increased aid at the 2005 Gleneagles summit in Scotland. But since then oil prices have steadily risen towards $100 a barrel.

Surveying 13 non-oil-producing African countries, including South Africa, Ghana, Tanzania, Ethiopia and Senegal, the IEA found that the increase in the cost of oil bought by the countries since 2004 was equivalent to 3 per cent of combined GDP.

This was more than the sum of debt relief and aid received over the past three years by the countries, which have a combined population of 270m, of whom 104m live on less than $1 a day.

The IEA’s warning comes as Senegal’s President Abdoulaye Wade said “crippling” oil prices threatened to provoke “unrest and violence” in Africa.

Financial Times