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The Africa Confidential Blog

  • 7th October 2021

$290 bn finance gap slows Africa's recovery

Blue Lines

The cost for Africa to counter the damage caused by the coronavirus pandemic, to engineer an economic bounce back and mitigate climate threats is rising, justifying the International Monetary Fund's warning of a two-speed global recovery.

The World Bank, while increasing its growth forecast for the region this year by 1% to 3.3%, reckons that African countries face a US$290 billion shortfall. Growth in those countries will lag behind other regions in part because of slow distribution of vaccines and vulnerability to new variants. African treasuries are struggling to bridge that gap with more borrowing and raising national corporate and indirect taxes.

Something of a boost may come from of the $650bn in Special Drawing Rights, the IMF's reserve curve, of which over $30bn will be distributed across African states, according to their shareholdings in the IMF. But little progress is reported on plans for a $100bn slice of the SDRs to be transferred to African economies as part of a global recovery effort.

The Group of 20's debt service suspension initiative will probably need to be extended, the Bank says. Some African finance ministers want it also to be widened to include commercial debts, provided there will be guarantees that this won't undermine market ratings. So far, these haven't been forthcoming.