Lilongwe – The African Development Bank (AfDB) has made a pitch for what it describes as an economic crisis firewall for the continent.
At its 56th Annual Meeting last week, the AfDB said an African Stability Mechanism with a liquidity and sustainability bailout facility would provide instant emergency funding to countries in times of crisis such as the current pandemic-induced one.
The chairman of the bank’s board of governors, Finance Minister Ken Ofori-Atta of Ghana, said the mechanism would provide absorbers in times of external shocks.
“This will be done by providing instant emergency access for countries in financial difficulty. The liquidity and sustainability facility could also underwrite a more effective market in African debt that reduces the higher liquidity premium developing countries pay for sustainability-linked investments,” said Minister Offori-Atta.
He called on world leaders to bridge the divide in economic recovery and healthcare funding, and increase the flow of vaccines to developing countries. Minister Offori-Atta also urged creditors to accommodate debt forgiveness.
Africa owes US$845 billion to various creditors.
“May this burden of responsibility we feel today stir us to action, let our hearts guide us so that we get the Africa we want, the Africa beyond aid,” Minister Offori-Atta said.
AfDB President Dr Akinwumi Adesina reflected on the challenges facing Africa, noting that COVID-19 had weakened global demand for exports.
“Before the pandemic, Africa was home to six of the fastest growing economies in the world. This changed as economies went into lockdown, travel was restricted, tourism dried up, while commodity prices plummeted because of weakened global demand for exports of oil, gas and commodities,” he said.
The continent’s accumulated GDP losses from the pandemic of between US$145 billion and US$190 billion, which could leave Africa with a funding gap of US$425 billion by 2030.
According to Dr Adesina, Africa’s economic recovery depended much on access to vaccines and sustainable debt management.
In a session on debt resolution at the AfDB meeting, policymakers warned that Africa entered the pandemic-induced economic crisis with strained balance sheets and the situation continued recession could further undercut governments’ positions.
Many African countries debt-to-GDP ratio has risen 15-20 percent over the past year.
IMF boss Ms Kristalina Georgieva weighed in: “As a third wave of the pandemic sweeps Africa, countries are also grappling with the world’s fastest COVID-19 growth rate. In support, the IMF plans to invest US$50 billion in the continent this year, of which US$30 billion will be available to Africa by August, and an additional US$60 billion by 2022.”
The IMF says it has allocated an unprecedented US$650 billion in Special Drawing Rights to members.