Multilateral institutions like the World Bank and the IMF have come under fire from African ministers and economists who say they are failing to step in to cushion the financial blow caused by the global pandemic.
Ghana’s minister of finance, Ken Ofori Ata, said at this week’s World Bank and IMF annual meetings that much more needs to be done to help economies cope with falling revenues, rising expenditures and increasing debt distress.
Ofori Ata appealed to the IMF to issue more of its special drawing rights (SDRs) to low-income African countries who have opted out of the G20 Debt Service Suspension Initiative (DSSI), which offers relief on official bilateral debt service payments.
DSSI-eligible African countries like Nigeria and Kenya have opted out of the initiative to preserve access to international capital markets.
“The IMF’s lending capacity should be doubled to $2.5tn. European countries have some $260bn in special drawing rights for which they have little use and could easily lend on to African countries. The US is opposing the issuance of new SDRs altogether,” he wrote in a Financial Times editorial on Monday.
Speaking at the Financial Times Africa Summit, Donald Kaberuka, the African Union’s special envoy on Covid-19, said that while the world stepped up to support poorer countries during the global financial crisis, it hasn’t yet delivered comparable support for Africa following the pandemic.
Massive liquidity support is needed to ensure poverty, inequality and unemployment due to Covid-19 is averted, said Vera Songwe, the UN under-secretary general and executive secretary of UNECA.
“We can’t lose the gains made over the past two decades. More liquidity is needed to put a floor on economic depression facing emerging and frontier markets. Africa is resilient in 2020. Without additional liquidity support it may not be resilient in 2021.”
Responding to the comments, IMF managing director Kristalina Georgieva said African countries need to borrow from the international market to finance their economies.
“Over the last couple of months many emerging markets have been able to tap into low interest rates because of the massive liquidity they have returned to markets successfully. No sub-Saharan African country has gone to market yet.”
IMF lending to Africa has increased significantly from an annual pre-pandemic average of $4.2bn to $26bn given to the continent since the pandemic so far, $16bn of which went to sub-Saharan Africa, she said.
“This is on average ten times more than we would have done in a year because we recognise that lack of access to financing is putting Africa in a difficult place.”
It’s up to African countries to be more transparent to make themselves attractive to private investors, she added. “That is a job for the countries themselves and for their partners.”
Since the outbreak began, Africa’s three largest economies (Egypt, Nigeria and South Africa) have received combined assistance of $15.5bn from the IMF to meet urgent balance of payments needs stemming from the pandemic, with South Africa making history by taking its first loan from the Fund.
The World Bank pledged to lend $160bn by June 2021 to help countries deal with the effects of the pandemic. Researchers at the Center for Global Development have found that the Bank is on track to miss its lending target by $81bn.
The IMF predicts economic growth on the continent will drop 7% this year for the first time in decades. Africa needs $1.2trn through to 2023 to recover from the damage caused by the pandemic, $900bn of which will be needed to shore up the finances of governments in sub-Saharan Africa.
African countries have over 1.5m cases of Covid-19 with 38,000 deaths, the African Union reports.