Page 4 - Nile Explorer Issue 12

Editorial

Africa’s post COVID-19

Economic outlook

n this issue, which is a special Edition countries are waiting with bated breath
Iand the first of our monthly frequency for the Joe Biden administration and Fred O. Oduke - Managing Editor
issues, we have dedicated a lot of space other rich economies under the G-20 to
on COVID-19 and Africa’s economic consider a proposal to allocate at least Other interventions include labour
recovery in the face the need for African $200 billion held in unused reserves market policies to protect workers
countries not to be left far behind in the at the International Monetary Fund and their jobs, and structural policies
race to roll out COVID-19 vaccination to deal with the adverse impact of the to enable economies to rebuild and
as part of its economic recovery plans. coronavirus on their economies. enhance their resilience to future shocks.
According to the African Development Africa is currently staring at a pandemic Public debt in emerging markets has
Bank update forecast released in response funding gap of approximately surged to levels not seen in 50 years,
December 2020, Africa’s economic $100 billion annually over the next three and many developing countries have
growth could rebound in 2021, years, according to initial estimates increasingly taken on debt on non-
provided that governments manage by the United Nations Economic concessional terms—from private
the COVID-19 infection rate well. Commission for Africa (Uneca). lenders and non-Paris Club members.
But beyond this, governments must If approved, IMF funds made available As the COVID-19 pandemic wreaks
restructure their economies to respond under a major issuance of the IMF’s havoc on the global economy, poorer
to the global sensibilities and realities. Special Drawing Rights (SDRs) – countries who will be hardest hit by
We are in a recession. reserves from central banks of all IMF
In a comprehensive socio-economic members – will provide additional the virus will also face a debt crisis.
assessment of the pandemic’s impact, resources to cash-strapped governments Debt service suspension is a powerful,
the Bank said growth was now projected on the continent. fast-acting measure that can bring real
to rebound to 3% in 2021 from -3.4% in However, given that SDRs are allocated benefits to people in poor countries,
the worst-case scenario for 2020. in proportion to each country’s particularly countries that don’t have
The predictions are contained in a shareholding (quota) in the IMF, what the financial resources to respond to the
supplement to the Bank’s African is required is for the largest shareholders coronavirus (COVID-19) crisis.
Economic Outlook, which was released of the bank to reallocate their unused For highly-indebted countries, it is
on 30 January. At the time, Africa’s reserves and increase capacity of the critical that sources of finance are
growth was forecast at 3.9% in 2020 and IMF to lend to low-income countries. concessional, or in the form of grants.
4.1% in 2021. Under projected scenarios for The fiscal space spent on debt service
Moreover, it will be important that contraction of growth, Africa could needs to be redirected to spending for
states work collectively to ensure that lose between $145.5 billion and $189.7 the response to the pandemic, including
the continent does not lag far behind in billion of GDP in 2020, according to the the economic response. Otherwise
accessing COVID-19 vaccines, already publication. a significant government spending
tolled out in developed countries, a Urgent policy interventions to response could mean big increases in
situation that could further precipitate mitigate the impact of the pandemic already unsustainable government debt.
and complicate economic recovery. must be instituted across Africa, in Africa could also have found a solution
Expert reports indicate that, in the well-sequenced and multipronged to its economic recovery in the Africa
worst-case scenario, an additional 49 approaches devoid of corruption and Continental Free Trade Area (AfCFTA) ,
million Africans could be pushed into mismanagement. that is if countries will push forward with
extreme poverty by the pandemic and Public health response to contain its implementation to make trade within
its aftermath. The number of people in the spread of the virus and minimize the continent support investments and
extreme poverty in Africa (using the fatalities is key, but this must also growth.
$1.90 international poverty line) could include monetary policy responses to However, these benefits will only come
reach 453.4 million in 2020 as a result ease liquidity constraints and solvency if the teething problems that arise from
of the pandemic, compared to 425.2 risks, and fiscal responses to cushion the implementation can be tackled. Indeed,
million under the no-outbreak scenario. economic impacts of the pandemic on AfCFTA will be a shot in the arm for
It is therefore not surprising that African livelihoods and to assist businesses. Africa’s development post COVID-19.

4 | The Nile Explorer 012