COVID-19: ECA calls for extra financial liquidity for African countries

The Economic Commission for Africa (ECA) has raised concerns about the devastating impact of the COVID-19 pandemic on African economies. They are calling for an extra financial liquidity amounting to $500 billion through the International Monetary Fund's special drawing rights for Africa to receive more liquidity. The continent has faced a significant decline in growth with the first recession in over 25 years. Revenues have dropped drastically with countries experiencing a sharp decrease in revenue to GDP ratio. The impact has been felt across various sectors, including tourism, trade, and global supply chains. Africa has seen over 100 million people fall into poverty and is estimated to lose around 30 million jobs, leading to drops in productivity and government revenues. The ECA has proposed a $100 billion stimulus package to help revive the economies of African states, similar to the fiscal stimulus provided by developed countries. The delay in receiving this financial aid has raised concerns about the effectiveness and timeliness of the response. Vera Songwe, the Executive Secretary of the ECA, highlighted the importance of acting quickly to prevent further economic downturn. Drawing lessons from the 2008-2009 financial crisis, she emphasized the need for immediate and sustained fiscal stimulus to support businesses and prevent job losses. Developing economies must continue to inject liquidity into their economies to mitigate the impact of the crisis. Songwe acknowledged Africa's efforts in redirecting expenditure and implementing social safety nets using existing resources to combat the crisis. However, external financial support is essential to ensure a comprehensive recovery and prevent long-term economic challenges. The continent needs to grow at least 7% to lift people out of poverty, but achieving this target will require sustained support and investment. The ECA is advocating for the extension of debt service suspension initiatives and swift disbursement of special drawing rights to provide the necessary liquidity for African economies. While concerns about borrowing and debt distress exist, Songwe reassured that utilizing these financial mechanisms is crucial to stabilizing and rebuilding African economies without causing a debt trap. As African countries navigate the challenges brought on by the pandemic, the key focus remains on revitalizing the economy, creating jobs, and restoring growth. With the support of global financial institutions and coordinated efforts, Africa aims to bounce back from the current crisis and achieve sustainable development in the long run.