The Managing Director, International Monetary Fund (IMF), Ms Kristalina Georgieva has said the international community can help strengthen Africa’s recovery and resilience.
She said this at a High Level Knowledge Event of the 2021 Annual Meetings of the African Development Bank (AfDB).
The virtual AfDB 2021 Annual Meetings, began on Wednesday with the theme: “Building Resilient Economies in Post COVID-19 Africa.”
According to her, the best way to deal with debt is for economies to grow, a not so easy task during the pandemic, when governments are faced with reduced revenues and increased spending on crisis measures.
She, however, said that the crisis was an opportunity for transformative reforms to improve public services, strengthen governance and boost domestic revenue mobilisation.
“Think of how digitalisation can improve tax administration and revenue collection and the quality of public spending.
“With radical transparency, Africa can tap into new sources of finance, such as carbon offsets and there is room to encourage more private investment in social and physical infrastructure.”
Georgieva said that as noted at the G7 summit, Development Financing Institutions and multilateral partners intend to invest at least $80billion into the private sector in Africa over the next five years.
She said that the G20 Compact with Africa remained a key framework to enhance the business environment in the continent, and it was time to expand and strengthen the initiative.
“We also need to modernise international taxation, as we see growing support for a global minimum corporate tax, which can end the race to the bottom and reduce tax avoidance.
“We welcome international efforts on digital taxation. This will help ensure fairer distribution of tax revenues, which will help address Africa’s significant financing needs.”
Citing intervention efforts by the IMF, she said the fund was doing its part as it had swiftly ramped up financing for the continent, including providing in one year 13 times its average annual lending to sub-Saharan Africa.
She said it had also received support to increase access limits, so it could scale up its zero-interest lending.
The IMF MD recalled the membership’s backing of an unprecedented new allocation of Special Drawing Rights of 650 billion dollars, which once approved, hopefully by the end of August, would directly and immediately make about $33billion available to its African members.
She said this would boost members’ reserves and liquidity, without adding to their debt burden and also help address their emergency needs, including vaccines.
“In this pivotal moment, Africa can count on the IMF. We are deeply committed to all countries in the region, supporting the heavy lifting on recovery efforts and transformative reforms.”
Georgieva also said that to boost recovery, international cooperation to end the pandemic should be stepped up.
She referred to the IMF staff’s proposed $50billion plan that involves vaccinating at least 40 percent of the population of all countries by the end of 2021 and at least 60 percent by mid-2022.
She said that the $50billion price tag was dwarfed by the estimated $9trillion boost to global economic activity by 2025 from faster vaccine rollout and faster recovery.
“It would be the best public investment of our lives and it would be a game changer for Africa.
“Together with the World Bank, World Health Organisation and World Trade Organisation, we are forming a ‘war room,’ a task force to monitor and accelerate the implementation of this plan.
“I am encouraged by pledges for vaccine support from international partners, including one billion doses announced at the G7 summit. I strongly support efforts to diversify vaccine production on the continent.”
To also boost recovery, she recommended that the world needs to help Africa deal with a growing debt burden.
She said that debt levels which were already elevated before the pandemic had increased sharply.
According to her, public debt in sub-Saharan Africa jumped by more than six percentage points to 58 per cent of Gross Domestic Product (GDP) in 2020, the highest level in almost two decades.
She added that interest payments in 2020 reached 20 percent of tax revenue for the region as a whole and exceeded one-third of revenue in some countries.
Similarly, public debt in North Africa rose by about 12 percentage points to an average of 88 percent of GDP in 2020.
To help safeguard debt sustainability, she said that the world had stepped up, as the IMF had provided debt service relief to its poorest members.
“Together with the World Bank, we advocated for the G20 Debt Service Suspention Initiative, as well as for the Common Framework for debt resolution, designed to provide deeper debt relief to countries with higher debt vulnerabilities.
“Thanks to the joint efforts of our members, we have reached two historic milestones.
“The DSSI has provided much-needed breathing space and it has been extended until the end of this year,” she said.