In the aftermath of COVID-19, President Nana Akufo-Addo is advocating for a restructure of the global financial infrastructure to better react to Africa’s demands, as well as the forgiveness of debts owing by African nations.
President Akufo-Addo, who will speak at the Summit on Financing African Economies on Tuesday, May 18th, 2020 in Paris, France, observed that the Bretton Woods Conference, which took place as World War II came to an end, established a global financial architecture that has shown to be unfavorable to Africa over the previous 77 years.
According to the President, the economies of Europe, America, and Asia have expanded greatly over that period, but those of Africa have not, citing Cold War collateral damage, global economic injustice, an economic relationship based on power and resource grab, as well as leadership and governance challenges on the African continent as challenges plaguing the region.
President Akufo-Addo stated, “These issues have resulted in a global economic system that has shown to be incapable of supporting lives and livelihoods, as well as providing adequate long-term resources to promote Africa’s economic development.”
He went on to say that Africa’s development financing costs do not represent the continent’s economic fundamentals, creditworthiness, or default risk, using the example of Ghana, whose sovereign debt is more costly than that of Belarus, which pays one hundred (100) basis points less.
COVID-19 has exacerbated the fundamental imbalances plaguing African economies, according to the President, as indicated by the fact that just 2% of the 1.3 billion vaccine doses delivered globally at the end of April were in Africa.
“Africa’s total budget deficit grew from 4.7 percent of GDP in 2019 to 8.7 percent in 2020 as a result of the epidemic; overall debt levels are also anticipated to have climbed from 57 percent of GDP in 2019 to 70 percent in 2021. Without the ‘fiscal breathing room,’ Africa risks becoming ‘the forgotten continent,’ which is why comprehensive debt relief and debt elimination are urgently needed,” says President Akufo Addo.
“Just as the Bretton Woods institutions helped reconstruct the postwar global economy and revived international economic cooperation seventy-seven (77) years ago, there is now a historic opportunity to reset the global financial system’s economic norms to provide African nations an equitable shot at growth in the aftermath of the pandemic,” he stated.
As a result, at the summit, the President presented two proposals to assist solve the crisis facing Africa.
President Akufo-Addo proposed a third pillar in addition to the two pillars stated by President Macron, which should focus on the reorganization of the present global financial infrastructure to give access and equity to long-term funding to assist economic transformation in Africa.
“An African Stability Mechanism, similar to the European Stability Mechanism, should be established. “The African Stability Mechanism would serve as a permanent firewall for Africa, ensuring that nations in financial distress have immediate access to financial assistance,” he said.
The President’s second proposal is to bridge the immediate liquidity and probable insolvency challenges that the continent and its financial institutions are facing.
“Before the 2021 annual meetings, I ask the IMF to on-lend twenty-five to thirty percent of fresh six hundred and fifty billion dollar (US$650 billion) SDRs to help poor and vulnerable middle-income countries, boost IDA funding to improve the World Bank’s balance sheet, restock the African Development Bank and Afreximbank to encourage green investments, enable trade, and boost IDA funding to improve the World Bank’s balance sheet.