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.”
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
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.
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.