African Finance Ministers’ meeting opens with focus on Special Drawing Rights, digitalization and diversification

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The fifty-third session of the Conference of African Finance Ministers (COM), which was organised by the Economic Commission for Africa, opened in Addis Ababa on March 23, 2021 with strong statements from high-level leaders like the Prime Ministers of Ethiopia and Barbados, Abiy Ahmed, and Mia Motley respectively, commending Friday’s move by the world’s seven largest advanced economies to support the expansion of the IMF’s Special Drawing Rights to help developing countries cope with the coronavirus pandemic.

Commending the ECA for its role in helping advocate for the SDRs, Prime Minister Ahmed said that “Finance and development ministers from throughout the continent, together with UNECA, have been at the fore of discussions on the response to the COVID19 crisis and have proposed solutions that have benefited not just the continent but the world, such as the Debt Service Suspension Initiative and now the quest for Special Drawing Rights.” The Debt Service Suspension Initiative (DSSI) has delivered over $5 billion to Africa in 2020. 

SDRs play an influential role in global finance and help governments shore up reserves as well as provide foreign currency for trade.  They are also used as the basis of loans from the IMF's crucial crisis-lending facilities with the institution using the instruments to calculate its loans to needy countries.  

The Ethiopian Prime Minister called on global leaders and institutions to support measures to ease the impact of COVID-19 on Africa’s citizens and economies.  

“Africa has demonstrated that it is not only capable of facing this crisis, but it is also ready to formulate and implement solutions,” he said, adding African countries must focus on digital transformation, climate-smart economy and the institutional framework for implementation and accountability as they respond and reset towards a green resilient recovery from the pandemic. 

“On the digital economy, we must scale up our investments - a trend turbocharged by the COVID-19 pandemic. The digital economy is both a source of growth and a key competitive enabler of other productive sectors.” 

The Prime Minister urged the continent to “build resilient institutions capable of implementing reforms to help the continent withstand the challenges of the future.” 

“It requires reforms, consensus building, monitoring and course correction. It is the best anchor we can build as we prepare collectively for the next crisis. We need continental institutions, regional institutions and national institutions to all stand together,” he said. 

Prime Minister Motley, who is also the Chair of the joint World Bank-IMF Development Committee, also commended the IMF for acting early to support countries but said countries especially middle-income vulnerable countries needed more liquidity and asked that “rich countries pledge the other half of their additional and unused SDRs to developing countries” to help them to adequately respond to the health and economic crisis triggered by the pandemic. 

On the issue of vaccine availability in developing countries, Prime Minister Motley said: “We cannot leave vaccinating the world to unchecked market forces. We need a global approach to vaccination. These are not nice to have, they are imperatives. There is no turning back. We must reform the line, redouble our effort, and press forward.”  

“COVID-19 has stopped us in our tracks. We need a more comprehensive response to the deepest crisis of the last one hundred years.” 

For her part, ECA’s Executive Secretary, Vera Songwe, said: “There is now real momentum for collective action on the SDRs at the IMF and World Bank spring meetings following the recent G7 finance ministers meeting and we welcome this.”  

She added: “There has been a decoupling of the world’s response between the advanced and developing countries. Advanced economies reacted swiftly to shore up their economies providing trillion dollars in liquidity. On vaccines, a decoupling in access and finally on fiscal policy. To build forward better and close these gaps, the SDRs provide the key to solutions for emerging and frontier economies.” 

Ms. Songwe said Africa was not out of the response phase yet. It needs liquidity to move from response to recovery and an extension of the DSSI to the end of the year, she said, adding issuance of new SDRs was urgently needed.  

“As the developed world transitions from response to recovery, Africa should not be left behind,” she said, adding the continent’s recovery must be focused on job creation and green jobs.  

The increase in poverty may lead to a “lower for longer” poverty traps, compromising past gains. This, Ms. Songwe said, meant additional liquidity must make its way to the private sector and small to medium scale enterprises, the engine of Africa’s economy. Countries must put in place enabling reforms, she added. 

Ghana’s Finance Minister, Ken Ofori-Atta, speaking from Accra said: “Our approach to beating this pandemic will make the difference between a lost decade and a rapid recovery that puts us on a sustainable growth trajectory.” He said placing climate-conscious industrialization and digitalization at the foundation of Africa’s recovery and structural transformation was key to a green recovery. 

“Africa’s industrialization is a good strategy not only for Africa but the world,” the Ghanaian minister said.  

He added that now more than ever, Africa needed to prioritize building resilience, finding new financing models to support sustained recovery, stimulating domestic manufacturing capabilities to create jobs and mitigate the risks of the global supply-chain, leveraging African integration and regional value chains and scaling digital transformation and inclusive innovation.  

Outgoing COM Bureau Chair and Morocco’s Minister of Economy, Finance and Administration Reform, Mohamed Benchaâboune, for his part said, “Indeed, new digital technologies not only make it possible to increase the resilience of African countries in the face of increasingly unpredictable exogenous shocks, but they can also initiate a sustainable industrialization process that would help to diversify African economies, increase their added value, reduce their dependence on the outside world, increase their productivity and improve their capacity for job creation.” 

Minouche Shafik, Director of the London School of Economics and former Deputy Governor of the Bank of England, said African countries have an opportunity to “leapfrog” to affordable universal health care that can help during such crises through digital and technological innovations. 

She said the prevailing situation provided an opportunity “in which we can define a new social contract in Africa”. 

The opportunity, Ms. Shafik said, derived from the fact that many African countries were transitioning from a social contract that relies heavily on family to one where the State helps to carry some responsibilities, like taking care of the sick and the unemployed. The goal, the LSE Director added, was to get a better balance of security and opportunity on the continent, drawing from the current COVID-19 crisis. 

High-level panels focused on whether the multilateral system was prepared for the COVID-19 crisis and whether the private sector did enough; managing debt and liquidity and the role of the private sector, and whether Africa was ready to finance its own vaccine. 

This year’s hybrid meeting is being held under the theme “Africa’s sustainable industrialization and diversification in the digital era in the context of Covid-19. 

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