President Nana Addo Dankwa Akufo-Addo has called on the global community to increase its efforts to help developing countries overcome the devastations caused by the coronavirus pandemic as well as the Russia-Ukraine war.
These ugly developments, he said, had further worsened the plights of developing economies, with a heavy toll across the whole African continent.
Delivering a keynote address at the 15th Edition of the European Development Days (EDD) in Brussels, Belgium, yesterday, the President emphasised the need for the global community to help developing countries to recover from the turmoil, and safeguard their economies.
He noted the effects of the ongoing Russian invasion of Ukraine on African economies and what is in stock for developing countries, saying “a recent United Nations report estimates that 70% of Africa’s economies are at severe risk from the Russian war in Ukraine”.
“The World Bank also tells us that, subsequent to the conflict, the number of poor people in sub-Saharan African countries would rise from 413 million to 463 million this year, an increase of 50 million persons,” he pointed out.
He added: “In the midst of this, 18 African economies have experienced credit downgrades, even when all economies are suffering adverse fallouts from last year’s pandemic, and we, in Africa, are also facing the risk of so-called ‘taper-tantrums’, as investors exit our markets, thereby exacerbating the increasing cost of borrowing”.
The President explained that, at the moment, support for non-IMF programme countries to alleviate the debt burden is limited, as the initial facility designed by the G20 countries to offer respite to economies with elevated debt challenges. He added that the Debt Service Suspension Initiative (DSSI) had expired since December 2021, and had not been renewed.
He further stated that an amount of $650 billion Special Drawing Rights (SDR), approved by the IMF in August 2021, which was meant to provide significant relief, had seen Africa receive a total of only US$33 billion.
“This forms about five percent. Moreover, the promise to reallocate some US$100 billion of the SDR allocations to African economies, agreed to at the Paris Summit in May 2019, has so far yielded about US$36 billion in pledges as of April 2022,” he disclosed.
“African Risk Premium”
The President also noted that there is the matter of the “African Risk Premium”. This, he said, is when African entities are borrowing from the market which increases the cost of capital. He insisted that this must be addressed, especially as Africa provides the highest return on investments obtainable anywhere, and has a good record of debt repayment.
He stated that the combined effects of the debt situation, rising interest rates and rising cost of living had resulted in severe macroeconomic and financial instability, pointing out that “the ensuing damage cannot be cured so easily with the limited fiscal tools at our disposal and national policy adjustments”.
Touching on co-operation between Africa and Europe, the President said it should be the catalyst to ensure that Africa gets the needed assistance, especially in these trying times.
According to him, the long-standing relationship between Africa and Europe, founded on ties of blood, culture, geography and history, should serve as a platform for enhanced co-operation between the two continents.
“Indeed, no one needs to tell us that the issues of peace, progress and prosperity in Africa and Europe are deeply intertwined, which pre-suppose that ensuring the development of Africa should be in our common interest. Now more than ever, strong partnership between Europe and Africa, reinforced political dialogue, and expanded co-operation in the fields of economic growth and international security, are required,” he urged.
President Akufo-Addo further admonished members of the gathering to work together to achieve their goals, including a fair, equitable process of energy transition, stressing that it should be recognized that “the entire African continent is responsible for less than 4% of global emissions, and safeguards the prospects of Africa’s development”.
It is for these reasons, according to the President, that the establishment of the €300 billion Global Gateway package by the European Union is in order.
He believes it would boost public and private investment in the areas of infrastructure, energy and green transition, digital transformation, growth and jobs, transport and human development over the next seven years.
President Akufo-Addo stressed the need to make the package innovative in its approaches to infrastructure investments and financing, suggesting that “it should be characterised by demand-driven projects, which deliver on African defined priorities”.