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Economy & Politics

COVID-19: IMF Chief predicts $345 billion financing gap in African countries 

IMF boss predicts that African countries will experience a financing gap to the tune of $345 billion through 2023.

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IMF says it can mobilize $1 trillion loan to help countries counter Coronavirus

International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, has predicted that African countries will experience a financing gap to the tune of $345 billion through 2023. According to her, this finance gap is largely attributable to the economic impact of the pandemic on vulnerable African economies.

In a concerted effort to avert this threat, Kristalina called on developed countries and institutions to assist African states in weathering the global pandemic and its associated economic impact. She made the call in a conference on Friday. Driving home her point, Kristalina said, “The pandemic will not be over anywhere until it is over everywhere … All of us, countries and institutions, must do more to support Africa to cope with the next phase of this crisis.”

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She further asserted that African states had spent an additional 2.5% of gross domestic product on average to help their populations, and institutions like the IMF had also stepped up, but more aid was needed. Private lending also remained subdued, she added.

Commenting on how she arrived at the projected figure, Kristalina said, “Despite sizeable domestic adjustments, African states still need $1.2 trillion in financing through 2023, implying that some heavily indebted countries were being forced to choose between debt service and additional health and social spending.”

READ: IMF expects Nigeria’s GDP to shrink by 5.4% in 2020

She further said, “Current commitments from international lenders and official bilateral creditors would cover less than a quarter of the projected needs, and private lending remained limited, leaving the projected $345 billion funding gap.

Why this matters

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According to World Bank estimates, the pandemic, in addition to a collapse in commodity prices and a plague of locusts, has adversely affected African economies, putting additional 43 million people at risk of extreme poverty. African countries have reported more than 1 million coronavirus cases and some 23,000 deaths.

READ: IMF assessing additional tools to provide aid to pandemic-hit countries 

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In view of the details implying a potential threat to African economies and the world at large, IMF needs to seize the opportunity to call on members to make new pledges, so that the Fund can increase its concessional lending capacity, and loan its Special Drawing Rights —the IMF’s currency—to poorer countries.

It also backs an extension of the Group of 20’s moratorium in official bilateral debt payments beyond the end of 2020, and supports steps to strengthen the architecture for debt restructuring.

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Chidi Emenike is a graduate of economics, a Young African Leadership Initiative Fellow and an Investment Foundations certificate holder. He worked as a graduate Teaching Assistant in the Federal College of Education Kano and is also a trained National Peer Group Educator on Financial Inclusion

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    Economy & Politics

    Insecurity: FG to implement town hall meetings to reach a national consensus

    The meetings are set to address the twin issues of insecurity and its concomitant effect on national unity and cohesion.

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    Insecurity: FG to implement town hall meetings to reach a national consensus

    The Federal Government announced the launch of town hall meetings to address the twin issues of insecurity and its concomitant effect on national unity and cohesion.

    This was disclosed by the Minister of Information, Lai Mohammed, at the Town Hall Meeting in Kaduna on Thursday, themed “Setting Benchmarks for Enhanced Security and National Unity in Nigeria.”

    What the Minister is saying

    “The correct starting point towards addressing these myriads of problems is the building of an “elite consensus” on the security, unity, indissolubility, and peaceful existence of Nigeria.

    “Such elite consensus had worked in the past. Can we make it work now and proffer solutions in order to stave off the threats to our unity as a nation?” he said.

    The Minister disclosed that the meetings are necessary to bring all critical stakeholders together to deliberate on the issues and possibly reach a consensus on the way forward.

    “We expect this Town Hall meeting to develop concrete, implementable resolutions because a lot of talks and postulations had taken place with little or no requisite outcome.”

    In case you missed it 

    • Former Vice President, Atiku Abubakar warned that the rising insecurity in Nigeria is a result of rising youth unemployment. He urged Nigeria to tackle out-of-school children cases, pay a monthly stipend to poorer families, incorporate youths who are above school age into massive public works programmes and others.
    • Senator Ali Ndume insisted that the Federal Government needs to increase its total military spending to be able to tackle the rising insecurity in Nigeria which has seen a number of school students in 2021 kidnapped by bandits.

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    Business

    IMF lifts 2021 global GDP growth to 6%

    The group also warned that economic recoveries are diverging dangerously across and within countries.

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    Kristalina Georgieva, IMF boss hints at 'synchronized slowdown' in global growth , IMF: 40% of African countries can't pay back their debts , Nigeria worse off, posts grows lower than LIDC benchmark - IMF, Measures introduced by Nigeria to ensure transparent use of the $3.4b IMF loan

    The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.

    The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.

    READ: Corruption erodes the constituency for aid programmes and humanitarian relief – IMF

    What the IMF is saying

    “The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.

    This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.

    China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”

    READ: Nigeria needs structural and monetary policy reforms to unlock potential – IMF

    On divergent recoveries 

    The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.

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    “The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.

    “Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.

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    For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.

    READ: The 4th industrial revolution and the birth of a new international monetary system

    In case you missed it 

    The International Monetary Fund (IMF)  identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.

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