Financial liberalization in Africa and Asia

Asian countries have generally been more successful than African countries in liberalizing their financial systems. However, this simple comparison cn be misleading. Financial reform was implemented much earlier in most Asian countries than in Africa. In addition, the macroeconomic environment in Asia was far more favorable when governments started introducing reform measures. In the generally successful Asian countries, reforms were pursued while balance of payments and fiscal deficits were manageable and inflation was relatively low. The situation was markedly different in Africa, where a number of countries have attempted to implement financial liberalization in an environment of ongoing inflation, largely as a consequence of excessive fiscal deficits. Comparison of the experiences of the two continents suggest that if financial reforms are to succeed, they must be implemented in an appropriate macroeconomic, financial and institutional environment.