The Managing Director of the International Monetary Fund (IMF) Ms. Kristalina Georgieva said on Wednesday that the Washington DC-based institution is looking at a second round of support for Africa to respond to the COVID-19 economic turmoil.
That next round of financial support would focus even more on “transparency and accountability” so the money in “this dire moment goes to the intended purpose,” she said, speaking at her opening press conference at the IMF/World Bank Annual Meetings in Washington DC.
So far, the IMF has provided over $26 billion to about 40 countries in Africa, with roughly $9 billion going to North Africa and about $17 billion going to countries in Sub-Saharan Africa.
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Sub-Saharan Africa is the area of Africa that lies south of the Sahara, and consists of African countries and territories that are fully or partially south of the Sahara.
That definition can be a bit fluid. While the UN excludes Sudan from its definition of Sub-Saharan Africa, the African Union’s definition includes Sudan but instead excludes Mauritania.
Ms. Georgieva said the over $26 billion provided to the entire continent have helped fight the disease and cushion the economic blows on people and businesses.
The amount is ten times more than the Fund’s average annual lending in the previous decade.
Still, that money is not enough, she said, adding that between now and 2023, African states will face financing needs of $1.2 trillion.
Yet, the continent faces a projected gap of over $345 billion through 2023—and nearly half the burden is in Africa’s low-income countries, Georgieava said, calling on other nations to step in and help, and help now.
She said although some countries in Africa are confronting high debt burdens forcing them to choose between debt service and additional social and health spending, she has been mainly satisfied with the steps taken by African leaders.
“We have seen countries taking responsibility to genuinely direct the money where it matters the most – doctors, nurses, health system, vulnerable people, vulnerable parts of the economy.
“Quite a number of countries have strengthened their social safety net, they have used digital payment to direct more money to where the vulnerable people are in dire needs.
“And many countries have taken responsibility to keep the receipt,” and detail how the money was used, she said.
She said the current crisis is hitting Africa harder with growth projected to shrink this year by over 3 percent.
And while the IMF projects a 3 percent economic growth for Africa in 2021, for the rest of the world, it is projecting 5.2 percent growth.
“So rather than Africa growing faster than the rest of the world to meet the aspirations of people, it is going to growth slower unless we act,” Georgieva noted.
She said Africa needs to focus on reducing the “perceived” and “real” risks of investing in Africa so that “huge availability of resources” can trickle down to the continent, she said.
Georgieva also noted that while Sub-Saharan Africa has not issued any debt, the rest of the world has done just that, taking advantage of low interest rates.
In essence, most African countries are just borrowing, but not lending.
According to Georgieva, to fill the financing gap Africa would face between now and 2023, African countries themselves would need “to concentrate on ambitious reforms, to make themselves more attractive for investments from private sectors and also more capable of mobilizing domestic finances” for recovery and growth.
But, with the crisis still hitting hard, she said the IMF would continue to support Africa and others should too.
“We are going to continue to do more, we made a strong call to our membership for more concessional financing, for subsidy resources, so we can extend more support for Africa, and we are calling on others, especially in terms of providing grants, please step up, now is the time to help the continent,” she said.
Jaime Atienza, Oxfam International’s Debt Policy Lead, said in a statement that debt cancelation for the poorest countries in the world is the way to survive the economic turmoil they are facing as a result of COVID-19 pandemic.
“With the economic chaos caused by COVID-19 threatening to set the fight against poverty back decades, extending the Debt Service Suspension Initiative was the bare minimum the G20 could do. Despite the common framework announced – good news to deal with deep solvency problems but with details still unknown – the failure to cancel debt payments will only delay the tsunami of debt that will engulf many of the world’s poorest countries, leaving them unable to afford the investment in healthcare and social safety nets so desperately needed,” Atienza said.
Atienza added: “It is scandalous that powerful private lenders and multilateral institutions like the World Bank are still excluded – private sector debt still has no independent mechanism for review. Poor countries are continuing to repay debts to rich banks and hedge funds instead of investing in their COVID-19 response. Zambia is on the verge of default; others will follow if the G20 and private creditors don’t change course soon.
“Cancellation of debt is possible. Investment giants including BlackRock recently agreed a haircut of up to 50 per cent on their private debt with Argentina and Ecuador, yet there have been no such concessions for the poorest countries. If the G20 want to seriously support hundreds of millions of people get through this pandemic, debt should be cancelled by rich countries, multilaterals and private lenders alike.
“Additionally, after seven years of negotiations, the G20 has failed to build global consensus on digital taxation. Until an agreement can be reached, countries should be protected from trade sanctions to make their own rules to tax digital giants. It’s immoral that poor countries are continuing to lose at least $100 billion in revenue to tax havens, as they struggle with debt and a critical lack of resources to fight this pandemic.”