IMF: African countries face financing needs of $1.2 trillion through 2023 amid COVID-19 economic turmoil

International financial institutions have provided significant financial assistance to African countries in fast-track support amid the coronavirus economic turmoil, but African states still face financing needs of $1.2 trillion through 2023, the managing director of the International Monetary Fund (IMF) Ms. Kristalina Georgieva said on Friday.

“Current commitments from international financial institutions and official bilateral creditors are expected to fill less than a quarter of this need. With private capital still subdued, we face a projected gap of over $345 billion through 2023—and nearly half this burden is in Africa’s low-income countries,” Georgieva said in her opening remarks at ‘Mobilizing with Africa II High-Level Virtual Event.”

The IMF has provided around $26 billion to African nations to help fight the COVID-19 and cushion the economic blows on people and businesses. That financial assistance is ten times more than the annual average in the previous decade.

Georgieva said despite sizable domestic adjustments, some African countries are confronting high debt burdens forcing them to choose between debt service and additional social and health spending.

Georgieva said she is encouraged by countries like Burkina Faso, the Gambia, and the Central African Republic that have “put in place admirable governance mechanisms to ensure the funds benefit their people as intended.”

According to her, the ‘Mobilizing with Africa meeting’ is about “decisive actions we can pursue to close this gap.”

“At the IMF, we recognize how important and urgent it is to step up our support for Africa so the continent can accelerate the long ascent to recovery,” she said.

Georgieva highlighted some of the steps being taken to respond to the current crisis and reposition Africa for economic growth.

“First, we are working with our membership to further increase concessional lending capacity.  We have made impressive progress in replenishing the Poverty Reduction and Growth Trust and continue to work with members who can afford it to temporarily lend us some of their SDRs to step up concessional lending to countries who need it.  We are also calling for new grant pledges to make it possible to increase concessional financing for low-income countries. 

“Second, we commit to work with countries faced with unsustainable debt.  We support the extension of the G20’s Debt Service Suspension Initiative.  Beyond the DSSI, we recognize the need to further strengthen the international architecture for debt restructuring. And we are encouraged by the strong support of our membership for increasing the Catastrophe Containment and Relief Trust as we seek to mobilize the grant pledges needed for a third tranche. 

“Third, we are prioritizing support for Africa’s policymakers through our financial programs, surveillance, and capacity development programs.  The crisis offers opportunities for reforms and structural transformation underpinned by strong policies and institutions.  Without reform, external support will not be effective or sufficient,” she said.

Read Managing Director Georgieva’s Opening Remarks at Mobilizing with Africa II High-Level Virtual Event, October 9, 2020

Excellencies, Ministers, Ladies and Gentlemen—thank you for participating in this important event I am honored to co-host with President Malpass. 

We are here today because COVID-19 continues its assault on the health and wellbeing of people and on the economy.  In Africa, there are more than a million cases. Close to 37,000 deaths confirmed; countless others unconfirmed.

Jobs lost, family incomes down 12 percent. And, according to our colleagues at the World Bank, up to 43 million more people are at risk of extreme poverty.

We are here because in these harrowing, uncertain times one thing is certain: the pandemic will not be over anywhere until it is over everywhere.

In other words, it is in everybody’s interest to mobilize and fight this pandemic together. And that means mobilizing with Africa.

Progress made

Since our first Mobilizing with Africa meeting in the spring, we have seen African policymakers acting swiftly, despite often doing so faced with severe financial constraints. On average, they spent an additional 2.5 percent of GDP on health and social programs to meet their peoples’ needs.

The world has taken supportive action as well.

International financial institutions have provided significant financial assistance in fast-track support. This includes around $26 billion from the IMF – monies that have helped fight the disease and cushion the economic blows on people and businesses.  This is ten times more than the annual average in the previous decade. 

And, with the crisis still with us, we continue our mobilization. In the last weeks, the IMF Executive Board approved a six-month extension of higher access limits under our Rapid Credit Facility and Rapid Financing Instrument, as well as a six-month extension of debt relief for our poorest members under the Catastrophe Containment and Relief Trust.

Countries like Burkina Faso, the Gambia, and the Central African Republic have put in place admirable governance mechanisms to ensure the funds benefit their people as intended.

The financing challenge

But all of us—countries and institutions—must do more to support Africa to cope with the next phase of this crisis.

Despite sizable domestic adjustments, African states still face financing needs of $1.2 trillion through 2023. Some countries are confronting high debt burdens forcing them to choose between debt service and additional social and health spending.

Current commitments from international financial institutions and official bilateral creditors are expected to fill less than a quarter of this need.  With private capital still subdued, we face a projected gap of over $345 billion through 2023—and nearly half this burden is in Africa’s low-income countries.

Meeting the financing challenge

Today’s Mobilizing with Africa meeting is about decisive actions we can pursue to close this gap.

At the IMF, we recognize how important and urgent it is to step up our support for Africa so the continent can accelerate the long ascent to recovery:

First, we are working with our membership to further increase concessional lending capacity.  We have made impressive progress in replenishing the Poverty Reduction and Growth Trust and continue to work with members who can afford it to temporarily lend us some of their SDRs to step up concessional lending to countries who need it.  We are also calling for new grant pledges to make it possible to increase concessional financing for low-income countries. 

Second, we commit to work with countries faced with unsustainable debt.  We support the extension of the G20’s Debt Service Suspension Initiative.  Beyond the DSSI, we recognize the need to further strengthen the international architecture for debt restructuring. And we are encouraged by the strong support of our membership for increasing the Catastrophe Containment and Relief Trust as we seek to mobilize the grant pledges needed for a third tranche. 

Third, we are prioritizing support for Africa’s policymakers through our financial programs, surveillance, and capacity development programs.  The crisis offers opportunities for reforms and structural transformation underpinned by strong policies and institutions.  Without reform, external support will not be effective or sufficient.  

We will be there for our members as they pursue their strategies to strengthen public financial management, ensure financial stability and inclusion, boost trade, eliminate barriers to private investments, enhance growth and generate jobs for their youthful populations. 

We will support measures to improve the quality of public spending in key areas — health, education, social protection, digitalization, and infrastructure.

In all our activities we will work hand in hand with national authorities, regional institutions, and bilateral and multilateral partners. 

The pandemic does not respect national boundaries—we’re all climbing a mountain through a storm together, connected on one rope. So mobilizing with each other, mobilizing with Africa is not just the best choice.

It is the only choice.