Burkina Faso shattered by world’s fastest growing displacement crisis

By PRESS RELEASE
Jan 28 2020 (IPS-Partners)

The number of people displaced in Burkina Faso increased tenfold last year to over 560,000. The figure is predicted to skyrocket to 900,000 people by April as horrific violence continues to force families from their homes.

“Burkina Faso needs more than bullets and bombs. Military engagement alone is failing to protect vulnerable communities. Donors supporting military efforts to quell the extreme violence have not yet responded to the enormous humanitarian needs with equal emphasis,” warned NRC’s Secretary General Jan Egeland, who is visiting the country this week.

France and states from Africa’s Sahel region have increased the predominantly security-oriented response to the indiscriminate violence of many armed militants in northern and eastern Burkina Faso. But some of the large-scale military operations against armed groups have had dire humanitarian consequences, forcing communities to flee their homes in thousands.

The country is now on the brink of a hunger crisis. A staggering one in ten people in Burkina Faso will need food assistance by June. The violence is also storing up problems for future generations, as some armed groups deliberately target schools and teachers, leaving over 330,000 children without access to education.

“In the northern town of Barsalogho, I heard horrific stories from some of the 70,000 people who recently fled to camps where there is an acute need of water, sanitation, food and education. Insecurity and a lack of funding is severely hampering our work. Donor governments have not understood that this is the world’s fastest-growing displacement crisis. We still see a small aid response in a huge human catastrophe,” Egeland said.

Last year, less than half of the money required to meet humanitarian needs was received.

“We need to urgently scale up our presence to provide the assistance and protection these families deserve. Many told me they can’t sleep at night for fear of new attacks. Most are single mother led households, as their husbands and fathers are often dead or have fled from the targeted killings of men,” said Egeland.

The international community, alongside regional actors supporting the military response, must also acknowledge the root causes of the conflict that must be addressed, and for dialogue to be re-established between communities and authorities.

“I don’t understand what has happened, we used to talk to each other,” said Mariam, a displaced mother in Barsalogho. “If there were tensions between communities, leaders would have discussed according to our tradition. Now no one talks anymore, there are walls between us.”

NOTE TO EDITORS:

Photos and B-roll including video interviews with affected people can be downloaded for free use.

MEDIA CONTACTS:

    • Tom Peyre-Costa, Regional Media Adviser in Central and West Africa.
    Email: tom.peyrecosta@nrc.no Skype: tom.peyre-costa
    Whatsapp: +33658518391 Phone: +22665524421
    • NRC media hotline phone +47 90 56 23 29, email media@nrc.no

FACTS AND FIGURES:

    • Burkina Faso was the fastest growing displacement crisis of all humanitarian crises last year, in terms of the percentage increase in displacement. The number of displaced increased with more than 1,000% from about 50,000 at the beginning of the year to 560,000 in December 2019.
    • The number of deaths in Burkina Faso due to attacks jumped from about 80 in 2016 to over 1,800 last year.
    • 95 health centres were closed and 135 functioning at minimum capacity as of the end of 2019, jeopardizing the access of nearly 1.2 million people to basic healthcare.
    • 330,000 children are affected by the closure of 2,087 schools due to the insecurity and need urgent education assistance.
    • Not even half (48%) of the funds needed in 2019 for the humanitarian response were allocated. Required: US$187 million. Funded: US$89 million. The humanitarian community is requesting US$295 million for 2020.

Exchange Rate Undervaluation for Export-Led Growth Promotion

By Vladimir Popov and Jomo Kwame Sundaram
BERLIN and KUALA LUMPUR, Jan 28 2020 – One mercantilist view is that exchange rate undervaluation – e.g., via accumulation of foreign exchange reserves in China’s case – is ‘industrial policy’ to promote export-led growth, benefiting producers of exports while discouraging imports.

Taxes and subsidies are tools of selective industrial policy for which an efficient and clean bureaucracy is needed to successfully use them for growth-promotion.

Vladimir Popov

By discouraging imports and promoting exports, exchange rate undervaluation enhances cost competitiveness, e.g., by keeping wage costs down. Currency undervaluation is equivalent to import duties on all tradables and export subsidies.

But exchange rate undervaluation automatically boosts all production and export of ‘tradables’ without being selective. It is a blunt, non-selective instrument that can even work in highly corrupt environments or where the requisite competence is not available. Such promotion of export production avoids potentially corruptible, discretionary selection of beneficiaries.

Forex reserves accumulation as industrial policy?
Polterovich and Popov’s cross-country regressions for 1960-1999 suggest that foreign exchange (forex) reserves accumulation contributes to developing countries’ economic growth by increasing both capital productivity and the investment/GDP ratio.

For them, forex reserves accumulation causes expansionary real exchange rate (RER) undervaluation in the short run. RER undervaluation enables taking greater advantage of export externalities, boosting export-led growth. Accumulating forex reserves attracts foreign direct investment by raising government credibility and lowering dollar costs. Undervaluation may even improve wealth and social welfare.

Hence, they argue that forex reserves accumulation has been growth promoting by enabling exchange rate underpricing. In fact, however, there has been considerable variation in both exchange rate underpricing and forex reserves accumulation over the last four decades.

Jomo Kwame Sundaram

If a country manages to become internationally competitive – whether via higher productivity, lower wages, or a weak exchange rate – it will export more than it imports, developing a trade surplus. If this surplus is kept as forex reserves, the exchange rate depreciates and the trade surplus may grow.

The decade-long strong yen (endaka) period after the 1985 Plaza Accord may thus have helped end the post-war Japanese economic miracle. Arguably, the endaka contributed to its financial ‘big bang’ and subsequent stagnation in the 1990s and its lacklustre growth thereafter.

By contrast, Chancellor Helmut Kohl avoided a similar fate for the Deutschemark by ‘hiding’ behind the common European monetary zone currency (euro) and lowering the national wage rate by accelerating ‘reunification’ of West with East Germany.

Capital flowing uphill
Countries achieving high growth have mostly been net creditors, not net borrowers, i.e., they have saved more than they have invested. Even controlling for level of development, the relationship between the current account surplus and growth remains positive and significant.

This high correlation between domestic savings and investment, even in economies with relatively open capital accounts, is contrary to the popular presumption that capital would flow to countries with better investment climates and rates of return to investment.

High domestic savings rates have often, but not always supported high investment rates, which usually, if not always, leads to faster growth.

Krugman noted that although there were at least three large waves of capital flows to developing countries around the turn of the century, but none had led to growth miracles: “… the point is that there’s no striking evidence that capital flows have been a major source of economic success.”

Hence, many developing countries’ apparent policy preference to rely on external financing is ironic as economists puzzle over why ‘capital is flowing uphill’, from developing to developed countries.

As protectionist policies have been increasingly constrained by developed countries promoted free trade mantra, exchange rate undervaluation is one of the few available tools for promoting catch-up development.

The main analytical argument against exchange rate undervaluation is “if all developing countries were to pursue this policy, there would be a ‘beggar thy neighbour’ ‘race to the bottom’”.

Undervaluation without reserves accumulation?
Many in developing countries consider the policy of forex reserves accumulation to be wrongheaded. Forex reserves are a share of national savings not invested in the national economy as they are exported out of the country for low returns, usually deployed to finance consumption and investment elsewhere.

Forex reserves generally yield low returns if invested in safe instruments, such as US Treasury bills and similar debt obligations of other Western governments. Investing these savings inside the country would yield higher returns.