Sub-Saharan Africa needs significant additional funding to counter the damage caused by the coronavirus pandemic, bolster its prospects for economic recovery and mitigate the threats posed by climate change, according to the World Bank.
The regional economy is expected to grow 3.3% in 2021, after contracting by an estimated 2% last year, the Washington-based lender said in its latest Africa Pulse report on Wednesday. It raised its forecast for gross domestic product by one percentage point from its April report, largely due to better-than-expected commodity prices.
Still, economic growth in sub-Saharan Africa will lag behind that of rich countries due to the slow launch of Covid-19 vaccines, which leaves it vulnerable to new waves of infection, and fiscal restrictions weighing on stimulus measures. , said. Africa is the least inoculated region in the world with only 4.3% of its 1.2 billion people fully immunized against the disease, data from the Africa Centers for Disease Control and Prevention shows.
Budget support to individuals and businesses in the region has risen to 2.8% of GDP since January last year, compared with 17% of GDP in advanced economies, according to the Africa Pulse report. That’s because pre-virus fiscal restrictions left African countries unable to provide adequate stimulus measures to engineer a sustained recovery that creates jobs and addresses the health and economic needs brought on by the pandemic, he said. He estimated the funding gap at $ 290 billion in 2020.
“Accelerating the economic recovery in sub-Saharan Africa requires significant additional financing,” the lender said. “This is necessary to narrow the uneven path of recovery between rich and poor countries. In an environment of continued uncertainty surrounding the coronavirus and its variants, an aggressive fiscal consolidation agenda is counterintuitive and could prove detrimental to long-term growth. ”
The bank urged the international community to give African countries more fiscal space by easing some of their debt burden.
The Group of 20 Developed Economies Debt Service Suspension Initiative for borrowers in sub-Saharan Africa may need to be extended for a second time beyond December 2021 and relief under the common framework should be accelerated, the Bank said. World. The initiative has not achieved its goal of reducing debt service costs thus far, with potential savings estimated at just 1% of GDP as of January.
The new reserves known as special drawing rights, or SDRs, assigned by the International Monetary Fund to its members in August are “a good shot in the arm,” but might not be enough, at only about 3.6% of the $ 650. billion distributed in sub-Saharan Africa, the bank said.
“The international community must continue to explore different options that allow rich countries to voluntarily share their surplus SDRs with poor countries in the region with the greatest financing needs,” he said.
France has committed to reallocating part of its SDR to Africa. South African President Cyril Ramaphosa has asked rich nations to donate, and not just lend, their plots.
The sub-Saharan region will also need up to $ 50 billion each year for the next decade to adapt to climate change, according to the World Bank. Although the continent is a relatively low-carbon producer, it is more vulnerable to environmental changes due to its high dependence on rainfed agriculture. Rising temperatures, sea level and rainfall anomalies increase the frequency and intensity of natural disasters.
Adaptation financing is more cost-effective than frequent disaster relief and the region should “seize the climate opportunity to adapt and transform its economy” while adopting policies that foster sustainable and inclusive growth, the bank said. Linking climate finance with governance reforms could help mobilize resources, he said.
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