On Wednesday, March 10, Today News Africa’s Senior Correspondent Simon Ateba sat down with Managing Director at the International Monetary Fund, Kristalina Georgieva. COVID-19 has hit the African Continent particularly hard, and the IMF has provided over 17 billion dollars in assistance. The IMF leader praised the willingness of African nations to modify their lives in order to accommodate safety measures saying, “We need to recognize that African governments acted swiftly, it could have been much much worse.”
Sub-Saharan Africa’s economy shrunk by 2.6% last year and growth this year is expected to fall below the previously expected 5.5%. In addition, the World Bank found a nearly 20% reduction in remittance payments by diaspora. Remittances make up a significant portion of household income in less-advanced economies, resulting in a loss of over 445 billion dollars.
The continent, despite its relatively youthful population and low loss of life, has been hit particularly hard for two reasons identified by the managing director:
- African nations were unable to deploy as much of their GDP to combat the virus as more advanced economies. This reduced the “fiscal space” these governments had to respond to the crisis. The average spending of more-advanced economies on the pandemic response came out to 6% with less-advanced economies at 2%. When factoring in less-advanced economies are smaller to begin with, financial disparity becomes a clear factor in determining pandemic response.
- The prevalence of natural disasters and conflict on the continent increase the difficulty in dealing with the pandemic.
The IMF has lent 13 times more money than it normally would in a typical year. Currently, over 17 billion dollars have been distributed. The money has largely been used to support health systems; and, according to audits has been used appropriately. “When the crisis hit, speed was of an essence, to provide a financial lifetime to countries where economies virtually stopped,” says Georgieva. “What we see is by and large that governments have indeed provided vital support, lifesaving, livelihood saving support.”
Georgieva explained the IMF is not worried about the impact on debt levels as many of the biggest recipients entered the pandemic with large amounts of debt. Nearly 40% of low-income countries were already in debt and therefor the IMF has called for debt-service suspension. The suspension allows for repayment after the pandemic ends, but postponement may not be enough for many nations. The Common Framework plan seeks to determine debt sustainability in order to assist nations in repayment. Тhe IMF sees debt cancellation as a last resort and favors letting borrowers work out individual repayment plans.
The IMF remains committed to increasing access to emergency financing and is discussing two important questions concerning, “How to build more concessional lending capacity at the fund, so we can support our members in need with better conditions than the general allocation of fund resources, and secondly, how to thoughtfully apply allocation of new sdrs.”
As Africa begins the next phase of recovery, international institutions such as the IMF will be critical in allocating resources to the hard-hit continent. The path ahead will require a transformation of African economies to better adapt to a changing world. Innovations in internet access, public health measures, and fiscal policy all serve to assist this process. Today News Africa thanks Kristalina Georgieva and her willingness to answer questions about Africa’s future.