Ghana confirmed its first two COVID-19 cases on March 12, 2020, imports from Norway and Turkey. Africa has since recorded over 1.5 million cases and counting. In terms of infections and deaths, we have fared better than most other regions.
Perhaps this is because of our youthful population, the natural social distancing of outdoor living and working conditions, experience with infectious disease management, or simply good leadership.
Our economies, however, have not been spared. Across the continent, governments are facing falling revenues, rising expenditures, increasing debt distress, and significant reversals in development indicators. In an omen of what is to come, Zambia now appears headed for the continent’s first pandemic-related private debt default.
The past six months have brought laudable interventions from multilateral institutions and the G20 countries. The G20 moved quickly to establish the Debt Service Suspension Initiative (DSSI), which has secured deferrals of some USD$5.3 billion in debt service payments, the IMF has approved over US$25 billion in emergency funding to Africa, and the World Bank and EU front loading programme has provided US$160 billion.
Yet we need the international community to do more. We need to see a fierce urgency for change from all actors, with all options on the table. Now is not the time for the world’s great economic powers to turn inward and focus only on their own survival.
As Dr. Martin Luther King said in his 1968 speech, “I’ve Been to the Mountaintop,” the parable of the Good Samaritan calls us not to allow fear and self-interest to prevent us from helping others. One should not ask, “‘If I stop to help this man, what will happen to me?’ The Good Samaritan came by, and he reversed the question: ‘If I do not stop to help this man, what will happen to him?’”
What will happen to African economies is clear. South Africa’s economy has already contracted by a devastating 51%, one of the steepest of any major economy in the world, while it faces a 15% budget deficit. Countries such as Cote d’Ivoire, Ethiopia, Ghana, Kenya, Nigeria, Senegal, and South Africa have received sovereign downgrades or negative outlooks from the ratings agencies. Even now, as Paul Collier has written, African resources are flowing to the West due to lower commodity prices, reduced tourism, capital flight, at least a 20% reduction in remittances, and purchase of PPE and medications from Western countries.
The human costs are tremendous. Up to 39 million people are expected to slip below the poverty line. We can see the gains of the past decade – and the promise of the next – slipping away.
As we approach the World Bank and IMF Fall Meetings, much more needs to be done. The IMF’s lending capacity should be doubled to US$2.5 trillion to increase assistance to member countries in need. For example, European countries have some US$260 billion in Special Drawing Rights (SDRs) for which they have little use and could on-lend to African countries, while the U.S in addition opposes the issuance of new SDRs entirely.
Meanwhile, China is negotiating with Africa on a country by country basis rather than continental basis. Some of its state-owned financial institutions are not officially included in the G20 debt suspension. China, however, remains an important partner in Africa’s infrastructure development, with over US$143 billion of loans to the continent. Private creditors and the Institute of International Finance (IIF) have remained conspicuously silent, even as the predicted defaults start.
African finance ministers have asked for an extended debt standstill of two years; US$300 billion in highly concessional new financing over three years to accelerate economic recovery; the structuring of credit enhanced Special Liquidity and Sustainability Facility (SLSF) to make it cheaper and easier to access the capital markets; and a debt relief and cancellation programme for an increasing number of vulnerable countries.
On a global scale, these African demands are a drop in the bucket. The G20 countries have already spent over US$10 trillion on recovery and economic stimulus packages for their own economies, while in 2008, a US$3 billion package was agreed. Africa’s US$300 billion request is barely 3% of what OECD countries have spent so far to safeguard their economies from the pandemic.
Where is the fierce urgency for change in a global event of this scale? We must all ask: ‘If I do not stop to help this man, what will happen to him?’
What will happen to Africa — and to the world? As President Adesina said, Africa has lost a decade of economic growth. The stakes are high. This continent of 1.3 billion people, with the youngest population in the world and approximately 30% of the world’s natural resources and 60% of the world’s arable lands. A very unsettling picture of Picasso’s Guernica confronts us. We simply cannot walk away from Omelas.
We must use this opportunity to build back better and greener and effect a tectonic shift of the global financial architecture. We must be ambitious in our reforms, addressing fundamental inequities in the global financial system. For example, Africa continues to pay an unsustainable and unjustified risk premium of some 600-800 basis. The US$50 billion cost of illicit financial flows remains.
We must reorient ourselves for true partnerships between nations, development banks, and the private sector, undergirded by mutual interest, to create a fairer and a more sustainable world. As the IMF Managing Director, Ms. Georgieva said, “Preventing such a crisis can make the difference between a lost decade and a rapid recovery that puts countries on a sustainable growth trajectory”.
Though we hope to find answers to the seemingly intractable positions of Africa; Europe, China and the US, African nations cannot wait for others to act. Africa should take the lead in establishing a secretariat to synchronize and coordinate the varied interest groups and centres of power to restructure the global financial architecture in partnership with the G20, World Bank, IMF and UN, to make it fit for purpose for Africa and other developing countries as we navigate the post-COVID recovery.
A new era dawns and we cannot waste it, even as we help find answers to the seemingly intractable positions of Europe, China and the US and the moral failure of hegemony. It is my hope that by the next Annual General Meetings, we will have a global consensus for a new ecclesia for the Global financial architecture.
We must be strong and courageous as we make a way in the wilderness, else we will wake up from our spiritual stupor to a forlorn and melancholic world. As Nelson Mandela said, “Nothing is impossible: it always seems impossible until it is done.” We can only do this if we love our neighbour as ourselves, rediscover our common humanity, and propelled by a fierce urgency for change, heed the example of going Beyond the Good Samaritan to “Go and do likewise.”
>>>The writer is Ghana’s Minister for Finance. Excerpts of this essay were run in the Financial Times on Monday, October 12, 2020