Setting the development agenda and budget priorities for the continent in 2021, the bank’s shareholders and officials from across the development, finance and healthcare spectrum met from 23-25 June for talks centred around Africa’s economic recovery and Covid-response.
Held virtually for the second year running, the annual meeting of the continent’s biggest infrastructure financier, with assets of around $60bn, issued a clarion call to world leaders for loans to repay the continent’s burgeoning debts, and for meaningful overhaul of the global financial system to make it more equitable and inclusive.
Opening the summit, the chairman of the Bank’s Board of Governors, Ghana’s finance minister Ken Ofori-Atta, warned the continent faces a “lost decade” if Africa is left behind in the global recovery from the pandemic.
Likening the work of the three-day summit to the 1944 Bretton Woods Conference – where 44 world leaders convened to decide the fate of the post-World War 2 economic order, giving birth to the IMF and World Bank, he said:
“The global financial system as we reimagine it today, has the potential to shape economies and lives across the world for decades to come, for a more inclusive and prosperous world.”
Why does it matter so much to change the global financial architecture? Over the past year, this was the question presented to the finance minister of the world’s fastest growing economy in 2019 by colleagues, family, journalists and friends, he said.
Pointing to the dizzying divide in the global response to the pandemic, the countries and regions of the highest-income get vaccinated more than 30 times faster than those of the lowest, he argued. While those in higher-income countries have secured 68 doses per 100 people, those in low-income countries are wavering at two doses per 100 people, he said.
At the same time, while African countries could scratch a mere 2% of their GDP for stimulus packages, 20% of GDP and trillions of dollars went to support the economies of the north, he said.
“African countries and infrastructure projects by virtue of your postcodes are inherently riskier than in OECD countries, even when an assessment of credit and default-risk proves otherwise. We pay an ‘African Premium’ for entering into capital markets, and another 36% for insurance for loans from credit agencies,” he explains.
Calling on world leaders to be the architects of transformation he said: “The global financial architecture, designed without Africa some 75 years ago, is designed inadvertently to exclude Africa, and perpetually extend this equilibrium. Africa cannot truly rise unless a new financial global architecture is designed.”
Economic crisis firewall
This year, the bank also made its pitch for an economic crisis firewall, an African Stability Mechanism with a liquidity and sustainability bailout facility to provide instant emergency funding to countries, not unlike the European Stability Mechanism.
“The African Stability Mechanism will protect the continent against external shocks 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 Offori Atta.
Setting the tone for an ambitious week of talks, the Bank’s president, Akinwumi Adesina, sporting a resplendent red bow-tie, reflected on the challenges facing Africa.
“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.
The continent’s accumulated GDP losses from the pandemic of between $145bn-$190bn have left the region with a funding gap of $425bn by 2030.
Africa’s recovery depends on access to vaccines and loans for debt management, Adesina said. But with the continent producing just 1% of the global vaccine supply and countries facing a halt in supply due to India’s surging demand, less than 1.1% of the continent’s 1.1bn inhabitants have received two doses of the vaccine.
“Africa shouldn’t be begging for vaccines, it should be producing vaccines,” Adesina said.
In response, the AfDB pledged $3bn to produce doses as part of the African Union’s vaccine development plan.
Debt resolution talks
While African governments entered the crisis with strained balance sheets, the pandemic now risks undercutting the continent’s precarious progress further, policymakers warned in a session on debt resolution.
The continent faces a critical debt quagmire with its debt to GDP ratio rising by 15-20%.
As a third wave of the pandemic sweeps Africa, countries are also grappling with the world’s fastest Covid-19 growth rate, lamented the managing director of the IMF, Kristalina Georgieva. In support, the IMF plans to invest “a game-changing” $50bn in the continent this year and $60bn by 2022, she said. The fund has also ramped up funding for the continent by 13% and allocated an unprecedented $650bn in SDRs, $30bn of which will be available to Africa by August, she promised.
Over the past year, with more than 130,000 lives and 130m jobs lost on the continent, Sub-Saharan Africa needs $93bn annually over the next decade to overhaul its infrastructure, and $425bn to recover from the pandemic, the conference heard.
With the continent accounting for 17% of the global population, but 26% of the global disease burden, it accounted for less that 2% of the trillions spent globally on health, Offori-Atta claims.
“The threat today therefore is not that of the 1930s or the 1940s. It is not big powers going to war, instead it is the ever real and present danger of an entire continent being left behind.”
In his moving closing remarks Offori-Atta called on world leaders to bridge the startling divide in economic recovery and healthcare funding, and increase the flow of badly needed vaccines to the worst-hit corners of the continent.
The conference closed with calls for fresh capital, new SDRs, debt cancellation, debt forgiveness, credit enhancement and the restructuring of Africa’s alarming $845bn debt.
“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.”
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