The pandemic has created huge financing needs for governments, widened budget deficits anddriven governments into debt. On Wednesday, the African Development Bank hosted paneldiscussions on the issue. One knowledge event was titled "From Debt Resolution to Growth: The
Way Forward for Africa".African Development Bank President Dr. Akinwumi A. Adesina said: "The deep scars left by theCovid-19 pandemic (in Africa) will take time to heal." As a result of the pandemic, thecontinent's GDP fell by 2.1% in 2020 and poverty and inequality are increasing. At least 30million Africans fell into extreme poverty in 2020 and another 39 million could follow inpoverty in 2021.
The debt-to-GDP ratio is expected to increase by 10-15 percentage points in2021 and debt is a pervasive concern.Kristalina Georgieva, Managing Director of the IMF, said: "Clearly, the best way to manage debtis for economies to grow.
This is not an easy task during the pandemic, as governments facereduced revenues and increased spending on crisis measures. But this crisis is an opportunity fortransformative reforms to improve public service."Explaining that the IMF was considering increasing its zero-interest lending capacity, Georgievasaid that "Africa can count on the IMF" to implement recovery efforts and transformativereforms.
Georgieva and Ngozi Okonjo-Iweala, Director-General of the World TradeOrganisation, both stressed the need for Africa to receive vaccines to emerge from the healthcrisis and rebuild.
In two separate panels featuring African Development Bank Governors, participants identifiedthe need for African countries to strengthen domestic resource mobilization and manage publicfinances and debt transparently and productively. Above all, there is a need to ensure fulltransparency on debt held by non-Paris Club public enterprises, including loans guaranteed bybilateral creditors.
Corruption must be confronted more effectively, spending must be moreefficient, and there must be better budgetary discipline.The collection and spending cycle should also be digitized to reduce wastage. Countries need tomake better use of debt by focusing on financing productive social and economic infrastructure.
The effectiveness of debt-financed public investments can be enhanced with strongerinstitutional capacity.
Recalling that debt management also depends on the health of central banks, Tarek Amer,Governor of the Bank of Egypt and his country's Governor at the African Development Bank,stated that "monetary policy, exchange rate policy, budgetary policy, all of these must remainindependent" and governments must ensure that they create jobs and ensure price stability, through structural reforms so that economic growth and private sector development can helpreduce debt.
The goal is to ensure that Africa does not lose another decade, as was the case with previous debtrestructurings that took eight to ten years and did not produce any significant debt relief.
It is also important to establish an African stability mechanism to help African economies protectthemselves from external shocks, the African Development Bank President said.