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 countries.
President Akufo-Addo, who will speak at the Summit on Financing African Economies on Tuesday, May 18th, 2020 in Paris, France, noted that the Bretton Woods Conference, which took place as World War II came to an end, established a global financial architecture that has proven to be unfavorable to Africa over the last 77 years.
According to the President, the economies of Europe, America, and Asia have expanded greatly over that time, 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 issues plaguing the continent.
President Akufo-Addo stated, “These issues have resulted in a global economic system that has proven to be incapable of supporting lives and livelihoods, as well as allocating sufficient long-term resources to promote Africa’s economic transformation.”
He went on to say that Africa’s development finance costs do not represent the continent’s economic fundamentals, creditworthiness, or default risk, citing the example of Ghana, whose sovereign debt is more expensive than that of Belarus, which pays one hundred (100) basis points less.
The structural inequities confronting African economies, the President stressed, has been worsened by COVID-19, evidenced by the fact that a mere 2% of the 1.3 billion vaccine doses administered globally, at the end of April, were in Africa.
“The pandemic has also ensured that the total fiscal deficit of Africa rose from 4.7% of GDP in 2019 to 8.7% in 2020; overall debt levels are also estimated to have increased from 57% of GDP in 2019 to 70% in 2021. Without the ‘fiscal room to breathe’, Africa could truly become ‘the forgotten continent, and that is why there is urgent need for comprehensive debt relief and debt cancellation,” President Akufo-Addo stated.
“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 rules to provide African countries an equitable chance at development in the aftermath of the pandemic,” he stated.
As a result, at the summit, the President presented two proposals to assist address the situation facing Africa.
Beyond President Macron’s two pillars, President Akufo-Addo proposed a third pillar, which would focus on reshaping the current global financial architecture to offer access and equity to long-term credit to enable economic change.
“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 added.
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 support low and vulnerable middle-income countries, enhance IDA funding to improve the World Bank’s balance sheet, replenish the African Development Bank and Afreximbank to boost green investment, and make trade easier ‘he added’
President Akufo-Addo told the gathering that “it is, thus, in our joint interest to establish the conditions that would enable such a development to be of benefit to the entire globe” by 2050, when Africa will have a quarter of the world’s population, more than half of the global youth population, and a potential GDP of $29 trillion US dollars.