The Financial System Africa Needs by Vera Songwe

Africa’s vast economic potential is no secret. But harnessing it will only be possible if major developed countries and emerging economies work together to design a more inclusive and efficient global financial system that meets the continent’s liquidity and debt sustainability needs.

ADDIS ABABA — For African economies that have yet to recover from the COVID-19 pandemic, Russia’s war in Ukraine could not have come at a worse time. The economic wounds of the previous crisis had been stitched up, but it took longer for them to heal, let alone for the scars to fade. Today, commodity price spikes and supply chain disruptions are adding to inflationary pressures, leading to currency depreciation and soaring food and fuel prices. Since the beginning of the war, oil prices have reached their highest levels since 2008wheat prices have risen to 14 year highsand fertilizer prices jumped almost 30%.

These macro-trends have high human costs. No less than 25 African countries dependent on wheat imports from Russia and Ukraine. Rwanda and Tanzania import more than 60% of their wheat from the two countries. This figure is almost 70% in the Democratic Republic of the Congo and exceeds 80% in Egypt. Russia alone supplies 45% of Namibia’s wheat and 100% of Benin’s. With grain products often representing a significant portion of the local diet, the risk of hunger and undernourishment is increasing rapidly – ​​and not just for low-income households.

But many African governments have little room to maneuver to respond to this deepening crisis. The uncertainty related to the pandemic has led to capital flight on the continent, production has declined and countries’ debt burdens have increased. More than $40 billion in debt repayments were due in 2021, and debt servicing is expected to top 7% of Africa’s GDP in 2022 even before the Ukraine crisis and Reserve interest rate hikes US Federal.

To continue reading, register now.

As a registered user, you can enjoy more PS content every month – free.

Register

Where

Subscribe now for unlimited access to everything PS has to offer.


Source link

Don F. Davis