African economies: a summit to emerge from the crisis

Emmanuel Macron, gathered in Paris on Tuesday several African and European leaders, as part of the summit on the financing of African economies.

Although Africa’s healthcare system has been relatively untouched by the Covid-19 pandemic, its economy is in the red. Thirty leaders met this Tuesday at a summit to find solutions to the explosion of public debt and poverty that hit the continent.

Objective: to help African countries escape the debt trap and finance their future development.

About thirty African and European leaders met on Tuesday in Paris with the major international economic organizations, at the initiative of France, to try to save Africa from the financial asphyxiation which threatens it after the pandemic.

Africa is a relatively spared continent in terms of health, with only 130,000 deaths from Covid-19 out of a global total of nearly 3.4 million deaths. But she comes out financially bloodless.

The Paris meeting was divided into two sessions:

• public “debt financing and treatment”,
• “the African private sector”.

The idea of ​​this “Summit on the financing of African economies” germinated in the fall of 2020, when the International Monetary Fund (IMF) calculated that the continent was at risk of facing a financing gap of 290 billion dollars. ‘by 2023. Certainly, the growth of the continent, which experienced its first recession in half a century last year because of the pandemic, should rebound by 3.4% in 2021 and 4% in 2022. And a moratorium put in place in April 2020 has given some air to the most indebted African countries.

Public debts are exploding on the continent, like poverty: in 2021, 39 million Africans could fall into extreme poverty, according to the African Development Bank (AfDB).

The terms of cancellation or restructuring of part of the debt of African countries in the wake of that requested by Zambia, Chad and Ethiopia.

Calling for an “immediate moratorium on the service of all external debts (…) until the end of the pandemic” and a sanctuary of development aid, they also urged the IMF to allocate special drawing rights (SDR) to African countries to provide them with “the liquidity essential for the purchase of basic products and essential medical equipment”.

Africa’s partners are well aware, as the French presidency underlines, that a recovery based on a new cycle of public debt will “get nowhere”.
If the debt of African states, between 35% and 50% of GDP, is lower, compared to GDP, than that of their Western counterparts, it is heavy to refinance. In fact, the tax collection to honor the service is relatively low in proportion to the GDP due in particular to the weight of the gray economy, a reflection of the mistrust of the populations.

The principle of a global issue of SDRs of 650 billion dollars has been acquired, the United States having declared itself in favor at the end of March. It remains to be seen what will be allocated to African countries. Indeed, these famous “SDRs” are distributed according to the quotas of each country in the IMF: the largest goes to the richest countries. On paper, Africa would only benefit from $ 34 billion.

Africa’s quotas at the IMF should allow it to benefit from SDR 34 billion, including SDR 24 billion for sub-Saharan Africa, but this is insufficient, estimates the French presidency. Why should the rich countries, which do not really need these DSTs, not use their share for the benefit of Africa? The Elysee suggests, since a direct loan to countries is prohibited by the IMF’s statutes, to go through one of the latter’s subsidiaries, the Fund for Poverty Reduction and Growth (PRGF) for the granting of credits. at zero interest or ten-year loans with a five-year grace period for repayments.

Another solution, defended by Ivorian President Alassane Ouattara, would consist in revising quotas to ensure better representativeness of African countries within the IMF – and therefore better access to this financing instrument. France also intends to mobilize private investment to finance the immense development needs of a continent which aspires to depart from the logic of assistance.

The international community has already committed Monday in Paris to support the transition in Sudan, a country rich in oil and mining resources, by giving it a financial boost.

To “allow the return of Sudan in the concert of nations”, French President Emmanuel Macron declared himself in favor of “an outright cancellation of our debt to Sudan”, that is to say “nearly 5 billion dollars” .

A bilateral meeting between the French president and that of Mozambique is also scheduled on the sidelines of the summit Tuesday morning, to address in particular the situation in the north of the country, struggling with a jihadist guerrilla.

Emmanuel Macron ended Tuesday, May 18 in the evening, with the main announcement of support from the international community on the health plan, but without making a firm financial commitment on the economic level.

Recall that the objective of this summit was to launch a “New Deal” as the French president put it, in order to revive African economies asphyxiated by the economic consequences of the Covid-19 pandemic. The ambition was to raise $ 100 billion to partially meet Africa’s financing needs.

According to the IMF, nearly $ 300 billion is missing from a continent that needs to invest massively to eradicate poverty, develop infrastructure, face climate change and the jihadist threat.

At the end of the summit, the participants did not announce a firm commitment on this financial plan, but promised to initiate discussions around the “special drawing rights” (SDRs) of the International Monetary Fund.

The international community has already agreed on the principle of a global issue of SDRs of 650 billion dollars, of which 33 billion must automatically return to Africa, through the game of quotas within the institution of Washington . “It’s too little”, asserted the French president, who calls on the rich countries to allocate to the African countries a good part of their SDRs, as is committed to doing it France, to reach a total of 100 billion dollars .

Referring to “a big technical job to do”, Emmanuel Macron said he hoped for a “political agreement” on the subject of the SDRs either at the next G7 summit, or at that of the G20, or between June and October.

Another topic of discussion: the debt of African countries, which has exploded since the pandemic. If a moratorium has given some air to the most indebted countries, the next step would be to write off some of the debts, in a coordinated approach, under the aegis of the G20.

Indeed, Emmanuel Macron underlined that the participants had decided on a “very strong initiative to massively produce vaccines in Africa”, with in particular “financing from the World Bank”. “We support technology transfers and work that has been requested from the World Health Organization, the World Trade Organization and the Medicines Patent Pool [supported by the UN, Ed] to lift all the constraints in intellectual property terms which block the production of any type of vaccine whatsoever, ”the French president told reporters at the end of the conference. This announcement confirms international support for the lifting of patents on vaccines, demanded in particular by India and South Africa, after the call to this effect by US President Joe Biden, to which Europe has followed suit, despite opposition from pharmaceutical companies.

Given the time needed to launch these productions, Emmanuel Macron explained that in the short term the summit participants had agreed to “push the ambition of Covax (organization for the distribution of vaccines to poor countries) from 20% to 40% of people vaccinated in Africa ”. For now, with the exception of Morocco, where 13% of the population has received a first injection, vaccination rates remain low on the African continent, given an insufficient supply.

Senegalese President Macky Sall noted that the vaccination campaigns carried out with a bang in industrialized countries do not guarantee “absolutely no health security”. He warned of the risk of developing “extremely resistant variants” in Africa.

The President of the Democratic Republic of Congo (DRC), Félix Tshisekedi, who holds the rotating presidency of the African Union, stressed that the challenge was also to convince the populations, by countering the “work of undermining social networks who demonized vaccination ”. At the end of April, his country had to return to the Covax initiative 1.3 million doses of AstraZeneca vaccines for lack of being able to administer them before their expiry date. The reason ? Public mistrust of vaccines. “We received 1.6 million doses, we only managed to vaccinate 10,000 people and most of them expatriates.”

• 

• 

About The Author