By Magnus Ful
Containing the current crisis and re-triggering economies presents to be at the helm of IMFs priorities since the past “pandemic-months”, especially to poor regions like sub-Saharan Africa and Asia.
As indicated by IMF’s Director, African Department, Abebe Aemro Selassie, at the launch of the Regional Economic Outlook for Sub-Saharan Africa earlier this year, further published in Press release No 20/249 last month on imf.org, sub-Saharan Africa is now more than ever, in need of international development partners’ aid to combat the deathly pandemic and to reawaken its economy in the months/years ahead.
To this effect, IMF is currently chatting with governments in the continent in view of disbursing funds to make up holes, especially in the indiscriminate fiscal areas, evidently left by efforts to make up to the health and economic demands of their needy population. In this regard, It is only when the health – an acute part of the economic crisis, has subsided that, fiscal policy can revert to medium-term past consistency with debt sustainability considerations.
According to the Regional economic outlook release, guided by high frequency local indicators, “Sub-Saharan Africa’s economy is expected to drop 3.2 percent in 2020, double the contraction that was expected in April”, “the worst outcome on record”, noted Selassie.
Way forward: IMF Gives Pre and Post COVID-19 Economic Resilience Advice
Still going by Selassie, “…Africa’s resilience is being tested. The Continent has come through much and will come through this crisis also. But with stepped-up support from the international community, the region will be able to boost local containment efforts and healthcare capacity and also enjoy a robust recovery in the coming months”.
Times are unfortunately very hard and no one should sleep! Short, middle and why not long term economic policies will determine the durability of each and every country’s resilience in the face of adversity.
Probably with this mindset, Selassie pointed … “In sum, many authorities in Sub-Saharan Africa face a particularly severe set of near-term policy choices; concerning not only the scale of support they can afford, but also the pace at which they can reopen their economies.”
The role of development partners here is very vital as he further advises that,
“the ability of the countries to mount an adequate response will depend on assistance from the international community. With domestic savings and financing options severely limited, as countries have been shut out of capital markets, excellent financing on concessional and grant terms has an inordinate important role to play”.
Looser monetary policy, Selassie said, can complement these fiscal efforts and financial measures can help minimize credit or liquidity disruptions for businesses. Countries with flexible exchange rates can consider a combination of currency movement and the drawdown on reserves, while countries facing sizeable and disorderly outflows might consider temporary capital flow measures as part of a wider policy package. This crisis is unprecedented and equally calls for bold and decisive support from the international community.
The Director, while answering a question on debt from Eleni Giokos of CNN International, pleaded on both official and private bilateral creditors that any debt relief they could provide would give countries room, at this exceptional time, to be able to devote resources that would otherwise go to servicing this debt to be devoted to address really pressing health and other spending needs.
Above all, Selassie encourages sound and wise macroeconomic policies for the containment of the challenging health and economic crises. Like they saying goes; “health is wealth”, the preliminary concern of countries in the continent should be to save the lives of the people before the recovery agenda.
Concrete moves made by IMF in face of the pandemic
The international community has the International Monetary Fund (IMF) enclosed. In the face of the health and economic crises caused by the corona virus outbreak, Selassie says his organization has done a lot to reinforce resilience across the world and the African continent in particular.
In this way, he hinted press men that over 32 countries from sub-Saharan Africa who applied for help from the Fund were progressively acquiring portions in the $11billion disbursed under the rapid disbursing facility, making up part of the $100 billion emergency assistance forEmerging Market and Developing Countries (EMDC) announced earlier in April.
Following the approval of proposals to enhance the Fund’s emerging financing toolkit by the IMF Executive board, the Rapid Financing Instrument (RFI) was made available to all members; meanwhile the Rapid Credit Facility (RCF) was specified to only low-income countries eligible for concessional financing.
As for the moment, IMF’s managing Director, Kristalina Georgieva said in April that the Fund was responding to emergency financing calls from over 90 countries and that, doubling access to their emergency facilities will help them to meet the expected demand of the about US$100 billion in financing, which will in turn, grant stronger support to member countries in addressing COVID-19 crisis.
The RFI and RCF are flexible moves made by IMF to respond to the heavy and urgent financial needs of member countries in the face of the corona virus adversity. The annual access limits to the regular window of the RFI and the exogenous shocks window of the RCF were temporarily increased from 50 to 100 percent of quota.
Disbursement done under the rapid disbursement facility to eligible states (states with proven debt sustainability) is interest-free and payable over ten years, meanwhile countries above that cutoff is given at an exceptional low interest.
Selassie equally indicated that IMF will be providing over $300 million through the new financing and debt relief for the remainder of this year that would due to be repaid to The Fund
We are of the belief that, the lobbying, advice and funding opportunities offered by IMF is real good news for Africa and other continents given the immeasurable hazards caused by the corona virus hit. Even the most powerful nations have been made to understand that, no one is really strongest in the face of adversity.
This could just be an opportunity to economically meet up with other continents given that, the mark kept by the pandemic in other continents like Europe and America is far beyond that witnessed in Africa despite the porous health security in sub-Saharan Africa.
Wise borrowing! with the explosive advantages, and support from other international bodies could possibly make Africa get up given that, their labor force as of now remains slightly touched – different from the hotheaded figures singularly witnessed in the U.S.A today, talk less of China, Italy, Brazil, just to name but these. Africa could end up being chief in supplying human capital to other continents!