Financing of African economies: what results?
Audio 03:55
After the 2020 recession, the continent experienced a recovery in 2021, but Africa is the continent with the lowest growth this year.
© RFI Pierre René-Worms
By: Olivier Rogez Follow
4 min
After the 2020 recession, the continent experienced a recovery in 2021, but Africa is the continent with the lowest growth this year.
In debt, Africa does not have the means to finance recovery plans.
Also, the great powers and international institutions like the IMF have promised to help African economies.
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Have the promises of the international community been followed through?
As often in economics, it depends on your point of view.
Is the glass half empty or half full?
But what emerges from this year 2021 is first of all the Paris summit, and the desire to find funding for African economies.
It was last May.
This summit gave a boost to a movement of financial solidarity started in 2020. The IMF proceeded in August to a world issue of SDRs.
Basically, a creation of credits to help countries overcome the crisis.
And Africa received its share: 24 billion dollars, 33 if we add North Africa.
This is good, but it is clearly insufficient in view of the needs.
And this is where the idea of a reallocation of SDRs from the rich countries to the poorest countries was born.
Yes, because rich countries don't necessarily need all the SDRs created by the IMF, they already have their stimulus packages.
They therefore proposed to give Africa part of their quotas.
The objective (set in particular by Emmanuel Macron during the May summit) being to arrive at a sum close to 100 billion dollars for Africa.
France has announced that it will give 20% of its SDRs, or $ 5 billion.
China will give 10 billion, etc.
But the process takes a long time.
Why ?
Because rich countries, the IMF and the World Bank are still looking for the right mechanism to distribute these SDRs.
Will this be enough for Africa to overcome the current crisis?
It should be remembered that 30 million people on the continent fell into extreme poverty this year.
Estimates vary, but it would take between $ 30 billion and $ 50 billion over the next three years for the continent to get off to a good start. That is to say, at the same time helping the health sector, helping vulnerable populations, vaccinating people and supporting businesses through infrastructure programs. If we do the math, we start to approach the count. Yes, the IMF has disbursed money for contingency plans: $ 24 billion this year. Yes, SDRs are starting to arrive. Yes, the World Bank has just announced a major three-year program for poor countries. But we must resolve the issue of debt (it is only increasing) and debt service (which puts a strain on health and education budgets, in particular) and which will no longer be frozen from 2022.It all takes a long time. But time is running out if we want to avoid social crises.
Are there any reasons to be optimistic?
There are at least two.
On the one hand, the IMF has shown that it has changed its doctrine.
We are no longer faced with the terrible and icy institution of the 1990s which ruined states without eyecatching with structural adjustment plans.
Now is the time for understanding.
An example: IMF disbursements to African countries are ten times higher this year than they were in previous years.
The IMF has shown unusual agility in responding to Covid-19.
And it is the good surprise of this year for the countries concerned.
The second reason for optimism is that the financial world is starting to take over in Africa.
We are still at the very beginning, but this timid influx of private capital is already translating into a drop in the interest rates that governments pay when they borrow on the markets.
And that is a novelty.
Just ask the Ivorian, Benin or Senegalese leaders: they have never borrowed so cheaply.
Affordable private money is starting to take over from public money.
Until now Africa was cut off because of excessively high interest rates.
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Economy
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