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Africa faces worst economic shock since 1970s, says IMF chief

Africa will need more financial help to avoid the “long-term, terrible consequences” of the coronavirus pandemic, said Kristalina Georgieva, the IMF’s managing director. fund forecasts shrinking across the region by 3.2% this year, far worse than forecast just 10 weeks ago.

“This is the biggest blow in Africa since at least the 1970s,” Ms Georgieva said in an interview. Without additional support for tens of billions of dollars, she warned, “there could be very significant scars that could have lasting, terrible consequences.”

Africa was a “moving continent,” she said, given several economies in the region – such as Ghana, Ethiopia, Côte d’Ivoire, Rwanda and Senegal – that were among the fastest growing in the world in recent years. “This momentum is now drastically interrupted.”

Given the growing population in sub-Saharan Africa, the region will be even more affected in terms of per capita, she said, with an expected 5.4% drop in income that could push millions back to extreme poverty. Oil and tourism-dependent economies in sub-Saharan Africa will shrink by 4.9% and 9.7%, respectively, she said.

“When we look at the devastation that the crisis is causing everywhere, we have to admit that it is particularly severe for Africa,” Ms Georgieva said.

Many African governments are credited with swift action to stem the spread of the virus, which has so far infected a relatively low 400,000 people and killed 6,500 people.

But the economic impact has been severe due to falling commodity prices, stifled remittance flows and a collapse in tourism and investment. The IMF also remains concerned that the virus could “spread aggressively.”

Ms Georgieva said the IMF was already in the process of increasing average annual payments to Africa 16 times to $ 16 billion. “We have no intention of stopping here,” she said.

This year alone, the international community still had to find an additional $ 44 billion for Africa, either through debt relief, grants or concession funding, she said.

Ken Ofori-Ata, Ghana’s finance minister, is one of many African officials who complain that while richer countries have taken massive and unorthodox measures to prevent economic collapse, African countries are expected by creditors to abide by the rules. “You really want to shout, ‘I can’t breathe,'” he said.

Without naming the United States, Ms Georgieva called on the parties to reconsider their opposition to a new 1 trillion issue. Special drawing rights that would provide a boost to the liquidity of countries facing a sudden depletion of foreign exchange reserves. Stephen Mnuchin, the US Treasury Secretary, voiced Washington’s opposition to issuing SDRs, similar to “printing” money, on the grounds that some funds would go to China and Iran and not enough for poor countries with low IMF quotas. .

“At this point, we have not been able to gather enough support for a new issue of the SDR,” Ms Georgieva admitted.

“I would not say that this is not on the table, but we need 85 percent of the vote and we do not have that at the moment,” she said, adding that those countries with strong economic fundamentals had managed to issue bonds to bridge the liquidity gap. “For weak economies, for poor countries, this remains a very pressing issue.”

She, meanwhile, said the IMF was in talks to redistribute some of the $ 260 billion in existing unused SDRs from rich to poor countries, a proposal she described as “progressive”. However, African Union envoys appointed to raise the case on the continent say that will not be enough, as African countries are only entitled to 6.8% of these funds.

Ms Georgieva also called on African private sector creditors, such as banks and pension funds, to join a debt moratorium. “We ask everyone to look in the mirror,” she said, adding that rating agencies should not punish countries that have agreed with creditors to cut off debt.

“We are not talking about debt reduction and it is voluntary,” she said, given the possible stagnation of the private sector. “We are together in this. If there is someone who has not achieved it, please wake up. “

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