External financial flows into Africa seen rising to a record high of USD 200bn in 2013 - African Economic Outlook

By bne IntelliNews May 29, 2013

External financial flows into Africa hit a record high of an estimated USD 186.3bn in 2012, up from USD 158.3bn a year earlier and are expected to top USD 200bn this year, according to the African Economic Outlook 2013 report, produced by the African Development Bank (AfDB), the OECD Development Centre, the Economic Commission for Africa (ECA) and the UN Development Programme (UNDP). External flows as a share of Africa’s gross domestic product (GDP) increased to 9.2% last year from 8.3% in 2011 and are projected to reach about 9.5% in 2013, compared to an average of 9.4% of GDP over the past decade.

The flow of foreign direct investment (FDI), portfolio investment, official development assistance (ODA) and remittances, which is a major source of financing for African countries along with tax revenues, has quadrupled since 2001, the report notes. It explains that the strong performance partly reflects solid direct and portfolio investments, while remittances have risen spectacularly, overtaking ODA and FDI as the largest external flow to Africa in 2012. Remittances are important as they help boost consumption, hence reducing poverty. Remittances also help families get into formal financial markets, contributing to long-term growth through financial deepening.

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