Officials warn Africa is at ‘break the glass’ moment

Africa has reached a “glass breaking point”, an emergency in which international actors must take drastic action if the poorest continent in the world wants to avoid a human and economic disaster, said Ken Ofori-Atta, Minister of Finance of Ghana, to the Financial Times.

Ofori-Atta, who is also chairman of the World Bank-IMF Joint Development Committee, said the two institutions had acted quickly, but should do much more. They should provide governments with cash support as well as money to fight the virus and debt relief, he said, adding that the coronavirus was threatening to overwhelm the country’s poor health systems. Africa.

Bill Gates warned last month that the pandemic could kill 10 million Africans if it was allowed to cross the continent, and Imperial College London published a study saying that if governments do not act, the virus could kill 40 million people worldwide.

Ofori-Atta said the pandemic would also wreak economic havoc. It could wipe out 5-10% of Africa’s gross domestic product all at once, he said, as commodity prices fell and tourism, trade and remittance revenues declined.

Moody’s at the weekend Cut South Africa’s debt rating is rotten, ending the investment credit rating it had had for 25 years. South African Minister of Finance Tito Mboweni said: “To say that we are not worried and are shaking in our boots about what could be in the weeks and months ahead is an understatement.”

Ken Ofori-Atta, Minister of Finance of Ghana, warned that the pandemic could wipe out 10% of Africa’s gross domestic product © Bloomberg

Abebe Selassie, director of the IMF’s Africa department, said that the continent faced its deepest economic challenge for several generations. Bilateral lenders should consider immediate debt relief, he said, while the IMF would forgo debt payments for the poorest countries.

African governments must temporarily abandon fiscal austerity, added Abebe. “Even with limited fiscal space, the right thing to do is to increase public deficits to counter the immediate impact of the shock.”

Last week, Ofori-Atta co-chaired a meeting during which African finance ministers called for a $ 100 billion stimulus package. IMF said it made $ 50 billion available to emerging countries, including $ 10 billion for low-income countries.

Ofori-Atta said the poorest countries would be eligible to receive up to 50% of their IMF quota – a formula that determines voting rights – but that it would quadruple to 200%.

“The Fund and the World Bank are evolving rapidly, the feelings I hear from the G20 finance ministers are going in the right direction,” he said. “But we have to step up the pace and increase the amounts.” At the time of the spring meetings of the World Bank and the IMF in mid-April, he expected “that we can have an even more global and aggressive position”.

Charles Robertson, chief economist at Renaissance Capital, said that African economies would be hit twice: a collapse in income and a need to increase spending both for emergency health measures and to offset the economic impact locking measures.

In a Financial Times editorial last week, Ethiopian Prime Minister Abiy Ahmed said that if the coronavirus is not controlled in Africa, it will rebound quickly in the rest of the world.

Ofori-Atta said that trying to contain the coronavirus by locking in a continent where most people were under the age of 30 and many lived hand to mouth was threatening mass unrest. Social distancing was almost impossible when millions of people depended on their daily lives to earn a living and buy food in crowded markets.

Ghana nonetheless imposed a foreclosure on its two main regions, including the capital, Accra, as of Monday.

South African police have used tear gas to disperse crowds since it was locked on Friday. In Kinshasa, the capital of the Democratic Republic of the Congo, police reported hitting people with canes as they attempted to board crowded buses. Several countries, including Kenya, have imposed a curfew.

Ofori-Atta said Ghana, considered one of the most stable and best managed economies in Africa, should spend 0.5-1% of GDP to strengthen a health service that had proportionally a tenth the number of hospital staff in Great Britain. Direct cash transfers – via electronic payments to cell phones – should also be considered to protect people from deprivation.

Ghana was relatively fortunate because it had a $ 900 million stabilization fund from oil revenues and had managed in January to issue a $ 3 billion Eurobond. “Without that, we would have been completely in tatters,” he said, noting that markets have now closed to African broadcasters.

On Friday, the African Development Bank announced that it had placed a 3 billion dollar social bond over three years “Fight Covid-19” bearing a coupon of 0.75%. This showed that there was a way to get back into the African sovereign debt markets, said Ofori-Atta.

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