Question

Why did so many countries in Sub-Saharan Africa experience economic stagnation in the 1980s and 1990s? Is there any evidence of recovery in the last decade? Illustrate your answer with reference to literature and data relating to one or more Sub-Saharan African economy.

Answer 1

The 3 main reasons for the stagnation of sub-Saharan Africa in 1980s and 1990s are:

1. External oil price shock: In 1973 when OPEC was able to increase the oil prices, the African countries started borrowing money under World bank's influence in hope of Economic growth as seen by the US and Europe in the post World War 2 era. But in the case of Africa, the governments borrowed heavily but were not able to pay their debts due to external shocks. And hence these countries fell into the stagnation phase for nearly 2 decades
2. Declining terms of trade: Due to very high oil prices and increased rate of interest, the demand for primary goods decreased which led to decline in terms of trade for the sub-Saharan African nations.
3. Increased Real Rate of Interest: In October 1979 the US increased interest rates, which reached nearly 20 percent by July 1981 to throttle back its persistent inflation. This shock led directly to a massive increase in world interest rates.

In the last decade, there is a significant improvement in the GDP growth rate of these countries primarily due to the slowdown in the international markets or primary goods, especially by China. Also, there are investments by China into Africa which are helping these countries grow at a consistent rate in the past decade and been in the range of 5 to 6 percent. today sub-Saharan African countries are the fastest developing countries in the world.