maintaining and sustaining the economic gains and macroeconomic stability that african countries experienced before the crisis hit. in view of the anticipated reduction in aid flows and foreign direct investment, african countries need to give domestic savings mobilisation as much attention as the other foreign sources of development finance. in this respect, african countries may have to consider the utilisation of domestically generated resources such as international reserves ’, pension funds as well as the enhanced use of stock markets in raising financial resources required to finance development in africa. however, it is important to stress that the effective utilisation of imf world economic outlook database, april 2009. resources will be dependent on the credibility of the institutional frameworks within which these resources are deployed and the quality of the projects themselves in terms of their economic and social returns. sources of development finance ( a ) international reserves the global economy has witnessed an unprecedented accumulation of foreign exchange reserves in the last ten years, particularly in developing countries and africa has been no exception. according to the imfs currency composition of official foreign exchange reserves ( cofer ), between 2001 and 2008 total world reserves increased by 227 percent from us $ 2, 049. 6 billion to us $ 6, 702. 3 billion while emerging and developing country foreign reserves grew by 418 percent from us $ 818. 1 billion in 2001 to us $ 4, 237. 7 billion in 2008. the rapid build up in foreign reserves resulted mainly from high commodity prices and increased portfolio and foreign direct investments in emerging and developing countries. most developing country central banks approach foreign reserve asset allocation with a view of preserving capital and liquidity. this normally means that central banks invest in low risk, highly liquid assets with short - term investment horizons. it is noteworthy that the majority of the foreign reserves, which are held outside the african continent, entail an opportunity cost for developing countries as these resources are not used to finance development. in addition, the global crisis has brought to the fore the inherent risks in the placement of reserves with international fund managers with the collapse or near collapse of some of the worlds ’ leading asset managers such as lehmann brothers, bear stearns and fortis, threatening the safety of the continent ’ s international reserves. further, with the reduction in interest rates in developed economies where most of the foreign reserves are held, the returns on these investments have declined drastically, thereby increasing the opportunity cost of these reserves. these developments present an opportunity for african countries to consider foreign exchange reserves as a possible source

assumed a developmental role in global economics and finance following the impact stock markets have exerted in corporate finance and economic activity. stock markets enable firms to acquire much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. the stock market also plays a resource mobilisation role by encouraging savings through the purchase of equities that meet investors risk preferences and liquidity needs. on the important role of stock markets in financing development, it is noteworthy that some studies undertaken by the imf have shown that the stock markets have contributed to the financing of the growth of large corporation in certain african countries such as ghana, south africa, zimbabwe and mauritius. it is therefore imperative for african countries to develop this avenue of financing development to enable companies to raise capital at relatively lower cost. furthermore, the development of a well functioning stock and capital market can help africa access long - term debt in local currency thereby providing much - needed financing for the constantly growing infrastructure needs in the african continent. developing national and regional bond markets and secondary capital markets in general can also help in channelling excess banking sector liquidity into productive sectors. ( d ) natural resources there is little doubt that natural resources in africa will continue to play a significant role in africa ’ s development efforts. however, african countries must learn from the past on how well to manage commodity booms and ensure the productive use of financial resources generated from natural resources. african countries need to invest the resources arising from the exploitation of natural resources in domestic capital formation in order to generate a higher sustainable income that compensates for the depletion of a wasting asset. in this regard, it is important that commodity booms are managed in a manner that benefits african economies through careful planning and the deployment of appropriate strategies. commodity swaps or barter system have been suggested in some quarters as an innovative way for africa to get development finance taking into account the fact that most african countries are not able to borrow from the international financial institutions and are just coming out of heavy indebtedness. for this option of financing to be viable and profitable, there is need for commodity swaps to have a long - term positive impact of export diversification and economic growth for africa. in this regard, commodities could be swapped for infrastructure development to address the large infrastructure gap that is inhibiting further growth and diversification, technology transfer and market access for manufactured goods. these commodity swaps would have to be carefully crafted so that future generations are not disadvantaged from the resources. currently,