Mozambique, Sao Tome and Principe, Somalia and Sudan are in debt distress while 11 other African countries are at high risk of debt distress as the coronavirus pandemic continues to wreak havoc across the continent, says the Economic Commission African (ECA).
Bartholomew Armah, Officer in Charge of the Macroeconomics and Governance Division at the ECA, said this Friday at the 39th Meeting of Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development in Addis Ababa. Speaking under the sub-theme: ‘Implementation of the Istanbul Programme of Action for the Least Developed Countries’, Mr. Armah said seven of the 11 countries at high risk of debt distress have requested for debt relief through the Debt Service Suspension Initiative (DSSI) which the ECA is advocating be extended to 2022 to allow more nations to benefit.
He said additional resources were needed to ensure the smooth transition of these countries from Least Developed Countries (LDC) status to developing countries. The COVID-19 pandemic posed a challenge for future graduation of least developed countries, 33 of them African, to developing countries. Failing to graduate means loss of privileges like Official Development Assistance (ODA) and trade privileges, “therefore it is imperative to assist these countries to move from their LDC status.”
In addition to the gradual phasing out of international support measures, ODA, trade-related and other measures, countries that are in the process of graduating or have recently graduated from LDC status were faced with the additional challenge of financing their recovery from the pandemic, Mr. Armah said.
“Per the outcome document of the Africa Regional Review, held virtually on February 22-26 in Malawi, it is imperative to assist LDCs to access concessional financing to address their structural challenges, smooth their transition and strengthen their response to the crisis,” Mr. Armah said. He said without additional concessionary financing, the pandemic will undermine prospects for LDC graduation of Sao Tome and Principe, in particular.
Mr. Armah shared with the experts some of the measures being pushed by the ECA to support African recovery from COVID-19. These include the extension of the DSSI to 2022 and the issuance of Special Drawing Rights (SDRs) 500 billion. This will provide SDR 8.1billion (US$12.5bn) to African LDCs based on the quota system, giving them fiscal space to adequately respond to the pandemic and kick-start recovery.
Other measures include recapitalizing Multilateral Development Banks; credit enhancements and guarantees to lower the cost of commercial credit for countries with access to capital markets.
The Istanbul Programme of Action set an ambitious objective of enabling half of the LDCs to meet the criteria for graduation by 2020. However, COVID-19 happened and poses a challenge for future graduation prospects of LDCs, since containment and lockdown measures slowed down global economic activity and triggered recessions in several countries.
Real GDP growth in African LDCs is projected to fall from 4.0 per cent in 2019, to -1.5 per cent in 2020. “The IMF projects real GDP growth of African LDCs to rebound to 3.7 per cent in 2021, but this is below the minimum threshold of 7 percent required for transformation,” Mr. Armah said.
Armah said before COVID-19, least developed African countries had made good progress in reducing maternal deaths and under-five mortality rates, which fell 27.5 per cent from 98.6 in 2010, to 71 per 1000 live births in 2019. The countries also witnessed increasing per capita spending on primary education from 10.5 per cent of GDP to 12 per cent of GDP as well as improved gender parity in primary and secondary schools.
Mr. Armah said they also made progress in increasing primary school enrolment from 74 percent in 2015 to 82 percent in 2018; and were politically empowering women through increased representation in parliament.
He said the LDCs had also made progress, reducing export product concentration by diversifying their primary commodity exports. Product concentration declined from 0.56 in 2011 to 0.33 in 2019.
“During the period 2011-2019, only five African LDCs – Angola, Central Africa Republic, Djibouti, Eritrea, Ethiopia and United Republic of Tanzania – registered a decline in commodity dependence,” he said.
The African Continental Free Trade Area (AfCFTA) offers LDCs an opportunity to expand trade, said Mr. Armah, adding LDCs need to invest more in energy as this was critical for industrialization. Stemming illicit financial flows was also crucial for the development of the LDCs.
The theme of this year’s Conference of Ministers is Africa’s Sustainable Industrialization and Diversification in the Digital Era in the Context of COVID-19.