African leaders, the IMF and the World Bank on Friday appealed for rapid international action to help African countries respond to the coronavirus pandemic that will cause the continent’s economy to shrink by 1.25% in 2020, the worst reading on record.
IMF Managing Director Kristalina Georgieva told ministers, U.N. officials and others that the African continent lacked the resources and healthcare capacity to address the crisis, and needed at least $114 billion to cover urgent fiscal needs.
Even after pledges of support from bilateral, multilateral and private creditors, Africa faced a gap of around $44 billion, officials told the “Mobilizing with Africa” conference held online during the spring meetings of the World Bank and IMF.
“This pandemic has already had a devastating impact on Africa and its effects will deepen as the rate of infection rises. It is a setback for the progress we have made to eradicate poverty, inequality and underdevelopment,” said South African President Cyril Ramaphosa, who chairs the African Union.
“Large financing gaps remain and greater support is needed to ensure that African countries are able to respond effectively to the health crisis and address economic challenges,” he said in a joint statement release by the IMF and World Bank.
It said official creditors had mobilized up to $57 billion in emergency support for Africa in 2020 alone, including upwards of $18 billion each from the IMF and the World Bank, and private creditor support could amount to an estimated $13 billion this year. That still left a gap of $44 billion, and that would remain elevated next year, it said.
In a joint briefing paper, the IMF and World Bank warned that the widespread lack of basic sanitation in Africa and a large share of the population with pre-existing medical conditions risked a wider and more lethal spread of the disease.
Costs could rise substantially if the health shock was prolonged, forcing containment policies to remain in place longer and making economic recovery slower and less robust, it said. Estimates showed that it would cost about $36 billion to treat patients if 10% of Africa’s population became infected with COVID-19, the respiratory disease caused by the virus.
BROADER DEBT RELIEF MAY BE NEEDED
Officials welcomed a decision this week by G20 countries and the Paris Club to suspend bilateral official debt service payments for the poorest countries through year-end, and underscored the importance of private sector buy-in.
In Africa, eligible countries owed private sector creditors $16 billion in payments in 2020, or 10% of fiscal revenue, compared to $6 billion owed to official bilateral creditors, the IMF and World Bank briefing paper said.
“Contingent on a more severe growth and revenue downturn, a broader group of countries may require debt relief and existing arrangements extended,” it said.
World Bank Group President David Malpass said the Bank had already provided emergency support to 30 countries across Africa, with more to come, and it would continue to advocate for debt relief and increased resources.
“No one can stand on the sidelines; we cannot leave any country behind in our response,” he said. Of $160 billion in emergency funding the World Bank expects to provide over the next 15 months, $55 billion would go to Africa, he said.
United Nations Secretary-General Antonio Guterres estimated Africa’s financial needs ranged as high $200 billion. He urged creditors to grant a debt standstill for all developing countries, not just the poorest.
Nonprofit groups have called for the IMF to raise additional resourcing by selling some of its gold reserves or issuing an allocation of Special Drawing Rights, the currency of the global lender. Washington opposes an SDR allocation, which is akin to a central bank “printing” new money.