The United Nations Economic Commission for Africa (UNECA), says Africa needs to mobilise innovative financing for development programmes and effectively manage its debt burden.
This is contained in a statement issued by the Communications Section, ECA on Wednesday.
The statement said Mr Adam Elhiraika, Director of the Macroeconomics and Governance Division, UNECA said this at a workshop on Debt Management organised for policy makers from different African countries and research institutions.
He said if the debt burden was left untackled, it could threaten economic growth.
Elhiraika, however, said while debt was a significant source of funding for the economic growth and development of African countries, managing it had remained a major challenge for many countries.
“The COVID-19 pandemic and the Russia-Ukraine war have negatively affected the fiscal performance of African countries, where the debt-to-GDP ratio has increased from 57 per cent in 2019 and by 2021 it was to 66 per cent in 2022.” He attrbuted the increase in the debt burden to a growing spending on the health sector in responding to the pandemic.
He also spoke on the social costs states had endured to reduce the negative effects of the total or partial shutdown of economic activities.
Elhiraika said the global crises had worsened the debt distress for a number of African countries.
According to the statement, the International Monetary Fund’s (IMF) latest list of low-income countries’ Debt Sustainability Analysis shows that as of May 31, 16 African countries are at high risk of debt distress.
Also, seven were already in debt distress.
The IMF had recommended the G20 to inaugurate the DSSI which was established in 2021. The DSSI helped countries in focusing their efforts on combating the epidemic and protecting the lives and livelihoods of the most vulnerable individuals.
In an effort to help member states, UNECA in 2021 inaugurated the Liquidity and Sustainability Facility to lower liquidity premiums and enhance sovereign access to international bond markets for African countries.
The facility has the potential to save African countries an estimated 11 billion dollars over the next five years on borrowing costs.
Debt of low-income countries rose 12% to $ 860 billion in 2020, according to the World Bank's 2022 International Debt Statistics (IDS) report.
The report was released Monday at the annual meetings of the World Bank and the International Monetary Fund (IMF) in Washington.
The report says governments around the world have responded to the COVID-19 pandemic with massive fiscal, monetary and financial stimulus packages.
He added that the stimulus packages were aimed at tackling the health emergency, mitigating the impact of the pandemic on the poor and vulnerable and putting countries on the path to recovery.
Even before the pandemic, she said, many low- and middle-income countries were in a vulnerable position, with slower economic growth and high levels of public and external debt.
“The outstanding external debt of low- and middle-income countries increased by 5.3% in 2020 to reach $ 8.7 trillion. "
The report says that a comprehensive approach to debt management is needed to help low- and middle-income countries assess and reduce risk and achieve sustainable debt levels.
He said the deterioration in debt indicators was widespread and had impacted countries in all regions, adding that in all low- and middle-income countries, the rise in external indebtedness exceeded national income. gross (GNI) and export growth.
“The external debt / GNI ratio of low and middle income countries (excluding China) rose to 42% in 2020 from 37% in 2019, while their debt to exports ratio fell from 126 to 154% in 2020 percent in 2019.
“In response to the unprecedented challenges posed by the pandemic and the pressing demand from the World Bank Group and the IMF, in April 2020, the G20 launched the Debt Service Suspension Initiative (DSSI) to provide a temporary liquidity support to low-income countries.
“The G-20 countries have agreed to extend the deferral period until the end of 2021.
“In November 2020, the G20 agreed on a common framework for dealing with debt beyond the DSSI, an initiative to restructure unsustainable debt situations and protracted funding gaps in countries eligible for the DSSI. DSSI. "
He said, however, that overall, in 2020, net inflows of multilateral creditors to low- and middle-income countries reached $ 117 billion, the highest level in a decade.
In addition, net inflows of external public debt to low-income countries rose 25 percent to $ 71 billion, also the highest level in a decade.
He said multilateral creditors, including the IMF, provided $ 42 billion in net inflows while bilateral creditors accounted for an additional $ 10 billion.
David Malpass, President of the World Bank Group, said there was a need for a comprehensive approach to the debt problem, including debt reduction, faster restructuring and improved transparency.
He also said that sustainable debt levels were essential for economic recovery and poverty reduction.
Carmen Reinhart, Senior Vice President and Chief Economist of the World Bank, said economies around the world face a daunting challenge posed by high and rapidly increasing levels of debt.
“Policymakers need to prepare for the possibility of debt distress when financial market conditions become less favorable, especially in emerging and developing economies. "
The Nigeria News Agency reports that the IDS is a long-standing annual publication of the World Bank featuring external debt statistics and analysis for the 123 low- and middle-income countries that fall under the reporting system. of World Bank debt (DRS).
The report also assists policymakers and analysts by monitoring overall and country-specific external debt trends in low- and middle-income countries.
It provides a comprehensive picture of external borrowing and sources of lending by type of borrower and creditor with information on the availability and comparability of data.
The IMF team would like to thank the Chadian authorities and other counterparts for their hospitality, excellent cooperation and frank and constructive discussions.WASHINGTON DC, United States of America, October 9, 2021 / APO Group / -
Chad's economic and financial situation and its medium-term outlook have steadily deteriorated due to a series of long-lasting shocks since the start of the pandemic, coupled with delays in donor assistance caused by insufficient progress in discussions on debt treatment; Following financing assurances in support of debt processing by the Creditors' Committee for Chad under the common framework in June 2021, a strong commitment from private creditors is urgently needed to unlock IMF financing. which would catalyze substantial public funding for Chad; The Chadian government reiterated its firm commitment to an ambitious reform package agreed with IMF staff in January 2021, subject to IMF Board approval.
An International Monetary Fund (IMF) mission led by Edward Gemayel visited N'Djamena from October 5 to 9, 2021. Mr. Vitaliy Kramarenko, Deputy Director of the IMF's Africa Department, participated in the political discussions. The mission took stock of macroeconomic and financial developments, discussed progress on government reform priorities, and reviewed government efforts to intensify ongoing discussions on debt treatment with private sector creditors. A commitment from major private sector creditors is needed to establish a credible process is underway towards appropriate debt treatment, which is required for the IMF Executive Board's consideration of Chad's request for an agreement. extended credit facility.
At the end of his visit, Mr. Gemayel made the following statement:
“The economic and financial situation and the outlook have continued to deteriorate since the start of the pandemic. The combined and lasting shocks of the COVID-19 pandemic, volatile oil prices, climate change, terrorist attacks and delays in donor support continue to rock the Chadian economy. Real GDP is estimated to contract 0.8% in 2020 and is expected to grow a meager 1% this year, below pre-COVID forecasts as well as initial expectations regarding the impact of the pandemic. The significant and sustained downward revision reflects (i) the decline in investments, particularly in the oil sector, (ii) the disruption of economic activities and (iii) the significant reductions in spending in 2021, in particular the reduction in social services.
“Due to the significant deterioration in the economic outlook, servicing the external debt has become unaffordable and the debt unsustainable. Insufficient progress in debt treatment discussions delayed official financing. A clear path to restoring debt sustainability and mobilizing sufficient financing, including debt service relief, are essential preconditions for an IMF-backed program, which is expected to catalyze significant support from governments. donors. As these conditions have not yet been met, official funding dried up in 2021. As a result, the government was forced to cut essential social and development spending. The continuation of this situation could have serious social consequences in an already poor and fragile country, with unfavorable social indicators, including a rising poverty rate, poor access to basic services, and health and education indicators. among the worst in the world. To help cope with the situation, the Chadian authorities have decided to spend their share of the recent SDR allocation to meet urgent social needs.
“While official bilateral creditors have provided assurances of financing, a credible process towards appropriate debt treatment by the private sector on its willingness to negotiate debt treatments consistent with the parameters of the proposed IMF-supported program n has not yet been established. The official creditors of the Creditors Committee for Chad within the framework of the common framework for the treatment of debt beyond the DSSI (common framework), in their declaration of June 16, provided the IMF with assurances of official financing. . However, discussions with private sector creditors have been delayed.
“Not only will an IMF-backed program provide the urgently needed financing, it will also give a strong impetus to the authorities' medium-term reform agenda reflected in the January 2021 staff level agreement. structural reforms aimed at strengthening the government's capacity to strengthen social services, invest in human capital and infrastructure, begin to build resilience to climate change and promote private sector development. The mobilization of domestic revenues, the improvement of public finance management, governance and anti-corruption measures, as well as the reduction of administrative formalities are the main commitments of the program. Coordinated and timely donor support for budget and project financing as well as capacity development are essential for the success of the authorities' program.
“The mission was received by President Mahamat Idriss Deby, Prime Minister Padacké Pahimi, and met Mr. Tahir Hamid Nguilin, Minister of Finance and Budget, Mr. Issa Doubragne, Minister of the Economy, Planning of the Development and International Cooperation, Mr. Idriss Ahmat Idriss, the national director of the BEAC, and other senior officials, as well as representatives of international development partners.
“The IMF team would like to thank the Chadian authorities and other counterparts for their hospitality, excellent cooperation and frank and constructive discussions.
A credible debt restructuring process with private creditors is needed to unlock the official financing that Chad urgently needsWASHINGTON D.C., United States of America, September 8, 2021/APO Group/ --
Mr. Abebe Aemro Selassie , Director of the International Monetary Fund’s (IMF) African Department, has issued the following statement on Chad:
“Chad’s economic and financing situation continues to worsen following the combined shocks of the COVID-19 pandemic, oil price decline, climate change, and terrorist attacks. IMF staff and the Chadian authorities have continued a close dialogue on economic policies. Recent discussions confirm growing concerns about financing difficulties, forcing the government to cut critical social and development outlays, which, unless soon reversed, could have serious negative social and security consequences.
“Chad’s debt is assessed as unsustainable. A debt treatment is therefore critical and would pave the way for the IMF’s Executive Board to approve financing in support of Chad’s program of carefully targeted fiscal adjustment and reforms that were agreed with IMF staff in January . It would also open the door for the provision of significant financial support by other development partners.
“Official creditors in the Creditor Committee for Chad under the Common Framework for Debt Treatments beyond the DSSI (Common Framework), have, in their statement of June 16, supported Chad’s envisaged IMF-supported program and committed to negotiate debt restructuring terms accordingly. Comparable treatment from Chad’s private creditors is now necessary.
“A credible debt restructuring process with private creditors is needed to unlock the official financing that Chad urgently needs. A strong commitment from private creditors on their willingness to negotiate such debt treatments consistent with the parameters of the envisaged IMF-supported program without further delay would help boost Chad’s economic recovery and poverty reduction efforts. The IMF’s Managing Director has also endorsed the call by the Creditor Committee for private creditors to commit to negotiate such debt treatment without delay. The international community will be monitoring developments closely and looks forward to concrete progress in the engagement between Chad and its private creditors in the coming days.”
By Temitope Ponle
The African Development Bank (AfDB) has said it would invest 3 billion dollars to build Africa’s pharmaceutical industry in the next 10 years.
President of the AfDB, Dr Akinwumi Adesina, said this at a virtual Finance in Common Spring Meeting convened in collaboration with the Association of African Development Finance Institutions (AADFI) and the International Development Finance Club (IDFC) on Tuesday.
The meeting was tagged “Africa’s Green and Resilient Recovery: A Common Objective.”
The AfDB president added that it was also supporting the Africa Center for Disease Control (Africa CDC) with 28 million dollars to strengthen its capacity to tackle the issue of vaccines.
He added that the bank was currently working with partners on how to best support the financing of manufacturing of vaccines on the continent.
He emphasised that the bank was supportive of public development banks, which could be seen in the establishment of the AADFI and several national and regional banks on the continent.
He noted that public development banks must deepen “our ability to reach all parts of Africa.
“To ensure financial inclusion, especially for the unbanked, and expand access to finance, savings and insurance products and services, we need to work as one unified system.”
Adesina added that the unified system would accelerate economic development in Africa across all sectors.
He further projected the recovery of African economies from the COVID-19 pandemic, with an expected Gross Domestic Product (GDP) growth of 3.4 per cent in 2021.
“That recovery is expected to be across the board for oil-exporting countries, tourism-dependent economies, commodity-dependent economies and for non-resource dependent economies,” he said.
He also noted that tackling the issue of Africa’s debt must be of top priority, which he added was critical for the overall financial market stability in the short and medium term.
He also recalled that a number of efforts were being made to deal with the debt challenge.
“(This is) including the G20 Debt Service Suspension Initiative (DSSI) and the G20 Common Framework on debt treatment for public and private debts.
“Even then, the DSSI does not deal with reducing the quantum of debt of Africa, but only postpones debt service payments,” the AfDB president stated.
He noted that the cost of debt service would, however, continue to rise but added that the Special Drawing Rights (SDR) by the International Monetary Fund (IMF) would support the recovery process and address the debt challenge.
He urged that part of the SDR be used to support public development banks with additional resources to support countries to build back better, greener and with climate and environmental resilience.
Adesina also added that a share of the SDR should be used to pay down some of Africa’s huge private commercial debt, while bringing them into the G20 Common Framework.
“It is time to take this action now, to forestall what will be a payment crisis just down the road.
“I, therefore, would like to call for the strong collective support of Africa’s public development banks for these two strategic actions to assure financial stability of the continent and accelerate a post-COVID-19 economic recovery that is inclusive, green and climate resilient,” he said.
In his address, Mr Rémy Rioux, Chief Executive Officer, Agence Française de Développement (AFD), said Africa was ready for sustainable investment.
Rioux said the meeting was dedicated to Africa because the continent was a global priority “and its challenges requires us to go seek coordinated responses and actions.
“Let’s finance in common and build a common positive story of innovation and investment in Africa, leveraging and mobilising all willing stakeholders.
“The days of pure aid are over. Africa is ready for sustainable investment.”
The objective of the meeting was to devise joint actions to help boost a strong and inclusive recovery in Africa with the private sector.
It also aimed to give African public development banks the opportunity to demonstrate their role and contribution in supporting the transformation of the continent’s economy and societies towards sustainable and resilient development. (NAN)(NAN)
By Temitope Ponle
Eleven African countries have validated the strategies for implementing the African Continental Free Trade Area (AfCFTA) agreement, according to the United Nations Economic Commission for Africa (ECA).
Ms. Vera Songwe, Under-Secretary-General of the United Nations and Executive Secretary of ECA, said this in her opening statement at the 39th session of the Committee of Experts on Wednesday.
The expert meeting was also on the sidelines of the 53rd session of the committee.
Songwe listed countries like Mauritania, Senegal, Gambia, Guinea, Sierra Leone, Cote d'Ivoire, Togo, Niger, Cameroon, Zambia and Zimbabwe.
The executive secretary further said that the countries which were in the drafting phase of the agreement were Algeria, Burkina Faso, Chad, Congo, Kenya, Namibia and Malawi.
She added that the early stage countries were Nigeria, Tunisia, Guinea-Bissau, Benin, Gabon, Equatorial Guinea, Sudan, Tanzania, Botswana, Mozambique and Eswatini.
She said data was not available for other countries.
The AfCFTA entered into force on January 1. As of February, 54 of the 55 African Union member states had signed.
Additionally, the ECA chief said 25 countries have joined the Debt Service Suspension Initiative (DSSI) with potential savings equal to 0.71 percent of 2019 gross domestic product (GDP).
According to the World Bank, the DSSI is an initiative by the bank and the International Monetary Fund (IMF) urging the Group of 20 (G20) to help countries focus their resources on combating the COVID-19 pandemic and safeguarding people's lives and livelihoods.
The initiative went into effect on May 1, 2020 and has provided approximately $ 5 billion in relief to more than 40 eligible countries.
In his remarks, Amb. Tesfaye Sabo, Permanent Representative of Ethiopia to the African Union and ECA, said Africa has made a vigorous effort under the leadership of the African Union, to combat this pandemic and reduce its impact. socioeconomic.
Sabo said this was done by working with global partners and through mobilizing the African people.
“These efforts have produced commendable results,” he added.
The permanent representative said the conference was timely and crucial for understanding the complex socio-economic implications of the pandemic and for charting the way forward. (NOPE)
The Executive Secretary of the Economic Commission for Africa (ECA), Vera Songwe, on Friday 5 February 2021 met with African Ministers in charge of finance and the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, to discuss immediate economic response to the COVID-19 pandemic.
During the virtual meeting, which was convened by the ECA and IMF, the ministers were unanimous in their call for additional liquidity, $500 billion in Special Drawing Rights (SDR), better market access, more concessional resources and an extension in the Debt Service Suspension Initiative (DSSI), given the prolonged nature of the pandemic.
“We all know that the COVID-19 pandemic will persist for the next 2-3 years. Why are we extending the DSSI for 6 months and not 24 months?” said Ken Ofori-Atta, Ghana’s Minister of Finance and Economic Planning.
Mr Ofori-Atta said the cascading effects of COVID-19 were “a frightening thing for a finance minister to witness when they don’t have the means to respond.”
On access to the markets, Egypt’s Minister of Finance, Mohamed Maait, said “there’s a strong case for vulnerable countries to access the markets at affordable rate to afford essentials such as PPEs and food for their populations.”
Equitable access to COVID-19 vaccines was highlighted as an imperative for building forward better.
“The world stands to lose an estimated $9 trillion if only the rich get COVID-19 vaccines. 40% of this loss will be in advanced economies,” said Ms Georgieva.
In addition to vaccine availability, ECA’s Executive Secretary, Vera Songwe, stated that the issue of distribution and deployment were also worthy of serious attention. And for this reason countries needed additional fiscal space and less austerity.
Ms Georgieva noted that in order to build forward better, there is need for “bold and immediate action for response, recovery, and reset of African economies,” adding “liquidity and financing response is the bridge to vaccines and recovery.”
The objective of the meeting was to “seek IMF support in forging a way out of the crisis by transforming existing liquidity instruments and easing market access to alleviate the debt burden and provide much needed liquidity for the continent,” said Ms Songwe.
Noting that Ms Songwe’s call together with Finance ministers’ to triple concessional financing was “critical in the spring meetings’ conversations last year,” Ms Georgieva urged the ministers to prepare for a focused and practical discussion during the 2021 Spring Meetings.
“Now is the moment to demonstrate that SDR allocation can be part of a comprehensive support framework, together with debt reduction, debt relief and policy support actions in the countries,” said Ms Georgieva.
Minister Vera of Angola emphasized the importance of country reforms and in particular good governance reforms as an important component of the response and recovery plan. Angola she said she committed to continuing on its reform path.
The meeting agreed on the need for a concerted effort to accelerate reforms to increase revenues, improve expenditure and manage debt to attract more private sector investments into Africa.
China has called on multilateral creditors, like the World Bank, to explore various options to provide more support for the poorest countries in alleviating their debt burden.
Finance Minister Liu Kun made the call in an interview published on the website of the ministry of finance on Friday.
While providing positive net inflows to the Debt Service Suspension Initiative (DSSI)-eligible countries, multilateral creditors should take part in the debt treatment process to help the poorest countries through the tough times, Liu said.
Multilateral creditors now have the lion’s share of debt service payments owed by the poorest countries, said Liu, noting that they account for almost half of DSSI-eligible countries’ total public and publicly guaranteed debt.
“If the World Bank takes part in debt treatment through setting up a multilateral debt relief facility, China will positively consider providing donations to help ease the debt burden on the poorest countries,” Liu said.
Edited By: Fatima Sule/Felix Ajide
The International Monetary and Financial Committee (IMFC) has come up with an agreement to create a Common Framework for handling sovereign debt treatments beyond the Debt Service Suspension Initiative (DSSI).
Kristina Georgieva, Managing Director, International Monetary Fund (IMF), said this in Washington D. C. on Thursday at the IMFC opening press conference at the ongoing 2020 International Monetary Fund (IMF)/World Bank virtual annual meetings.
Georgieva said that there were two significant ‘deliverables’ from the G20 which were endorsed by the IMFC.
She added that the framework would be an important advancement in the international architecture for resolving sovereign debt matters in an orderly way.
“As you may recall, the IMF has raised several issues with improving the architecture so we can have fair, quick, relatively simple, relatively low-cost resolution of unsustainable debt.
“This common framework is a significant step in the right direction”, she added.
She, however, said that as the IMF had been emphasising, further private sector participation was still needed.
She also said that the two deliverables were in addition to three broad policy areas earlier discussed.
The first policy was that countries should continue with essential measures to protect lives and livelihoods.
“Stepping up vital health measures is imperative, as is well-targeted fiscal and monetary support to households and firms.
“So, the IMF’s message from these meetings is clear: avoid premature withdrawal—pulling the plug too soon risks serious, self-inflicted harm.”
Secondly, she urged them to build a more resilient and inclusive economy, adding that public investment, especially in green projects and digital infrastructure, could be a game-changer.
This, she said, was because it had the potential to create millions of new jobs, while boosting productivity and incomes.
Thirdly, she advised that countries should deal with debt.
According to her, global public debt was projected to reach a record high of 100 per cent of Gross Domestic Product in 2021.
“This is partly because countries rightly need to boost spending to fight the crisis and secure the recovery.
“Addressing this issue over the medium-term will be critical, but for many low-income countries, urgent action is required now”, she said.
Georgieva, however, said that strong international cooperation was needed especially on vaccine development and distribution.
According to her, faster progress on medical solutions could speed up the recovery and could add almost nine trillion dollars to global income by 2025.
This, in turn, could help narrow the income gap between richer and poorer nations.
It supports a Net Present Value (NPV)-neutral, time-bound suspension of principal and interest payments for eligible countries that make a formal request for debt relief from their official bilateral creditors.
It also encourages private creditors to participate on comparable terms.
Edited By: Nick Nicholas/Vivian Ihechu
Mr David Malpass, the President, the World Bank Group, said this on Wednesday during a virtual meeting with the G20 Finance Ministers and Central Bank Governors at the ongoing orld Bank annual meetings in at Washington D. C.
Malpass said that it was urgent to make rapid progress on a framework because the risk of disorderly defaults was rising.
He said that the bank’s latest economic and poverty data showed that desperate inequality was being caused by the COVID pandemic and economic shutdowns.
“The recession in advanced economies is less severe than had been feared but in most developing economies, it has become a depression, especially for the poorest and extreme poverty may rise by 150 million by 2021.
“Soon after our spring meetings, we were able to launch health emergency programmes in 111 countries and began a surge in our grants and highly concessional lending that will reach the limits of our capital structure and commitment authority.
“As part of this effort, we expect to provide over 50 billion dollars in grants or highly concessional credits by June 2021, helping provide large net positive flows to the poorest and most fragile countries and people.”
The president recalled that in March, the G20 endorsed a vital debt relief programme for the poorest countries, giving people a ray of hope.
He said that the Debt Service Suspension Initiative (DSSI) helped increase fiscal resources for over 40 countries and created more transparency on the overwhelming debt burden.
According to him, the goals for debt relief are fiscal savings for the poorest countries, greater debt transparency and a path forward for countries in debt distress.
“We are making progress but not nearly enough. The DSSI extension being agreed today is welcome and the term sheet has been strengthened in important ways.
“However, some core DSSI-related problems are still unresolved, notably a lack of participation by private creditors and incomplete participation by some official bilateral creditors.
“Interest charges compound quickly on the deferred amounts, leaving countries with even more debt.
“The DSSI has been a stopgap to provide fiscal resources and greater transparency while a longer-term solution for the debt crisis can be developed,” he said.
Malpass said that the tendency in past debt crises was for countries in debt distress to go through a series of “ineffective debt reschedulings that leaves them weaker’’.
He said that creditors might eventually allow them to get to a debt reduction process but at a tremendous cost to the poor, adding that they needed to work better and faster this time.
“On a positive note, I am happy to announce that yesterday afternoon, our board approved a package of up to 12 billion dollars to expand and fast-track COVID response for the purchase and distribution of COVID-19 vaccines, tests and treatments.
“The scale of the challenges ahead is staggering, so we need to do more. With the strong support of its shareholders, IDA has frontloaded IDA-19 resources to the fullest possible extent as a key part of the surge in our commitments this fiscal year.”
He, however said that IDA lending would have to decline in the next two years even though the latest forecasts, including those just announced by the IMF, suggests that the reduction in economic activity would extend well into subsequent years.
The News Agency of Nigeria reports that the IDA, a member of the World Bank Group, is an international financial institution with 173 member countries.
It offers concessional loans and grants to the world’s poorest developing countries.
The 2020 Annual Meetings of the IMF and the World Bank Group holding in Washington D. C. began on Oct. 12 and will end on Dec. 16.
Edited By: Grace Yussuf