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<p>The World Bank expects emerging markets and developing economies to shrink by 2.5 per cent this year, their first decline in six years, due to the impacts of Covid-19.  Furthermore, per capita incomes are also expected to contract and tip millions of people into extreme poverty this year. Rudi Steinbach, Senior Economist, World Bank joins CNBC Africa for more.</p>


Pandemic deals heavy blow to SSA economies

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<p>Some former African presidents have shown their support for the president of the African Development Bank, Akinwunmi Adesina. This was in a letter over the 16 count allegations levelled against him to which Adesina had stated his innocence. Although the ethics committee of the board of directors of the continental bank has cleared Adesina of these charges, the United States which is one of the major shareholders of the bank has called for an independent probe into the allegations.</p>


Arunma Oteh on Adesina’s probe & why COVID-19 represents an opportunity for Africa


<p></p>



<h3 class="wp-block-heading"><strong>Key Points:</strong></h3>



<ul class="wp-block-list"><li>Remittance flows to low and middle-income countries (LMICs) are projected to fall by almost 20% in 2020, one of the sharpest declines in history, according to the World Bank.</li></ul>



<ul class="wp-block-list"><li>Sub-Saharan Africa is projected by the World Bank to suffer a 23.1% decline in remittances over the course of 2020. The region has the highest remittance costs, with the average transfer of $200 charged at about 9%.</li></ul>



<p>The <a href="https://www.cnbcafrica.com/east-africa/2020/05/28/how-covid-19-is-impacting-funding-for-african-start-ups/">coronavirus</a> pandemic is leaving migrant workers unable to send money or goods home to families, cutting off a vital lifeline for communities already under siege from a barrage of external shocks.</p>



<p><a href="https://www.cnbcafrica.com/east-africa/2020/05/21/covid-19-takes-toll-on-ssa-diaspora-remittances/">Remittance</a> flows to low and middle-income countries (LMICs) are projected to fall by almost 20% in 2020, one of the sharpest declines in history, according to the World Bank.</p>



<p>The coronavirus pandemic has led to mass unemployment and hammered wages in the U.S. and Europe, key destinations for migrant workers, leaving many unable to send money home.&nbsp;<br><br>A number of major European countries have introduced furlough schemes to partially subsidize wages for those unable to work, but many of those in less formal employment have still found themselves without income. For workers in the U.S., there is less of a social safety net, which has led to more than 40 million Americans filing for unemployment since the pandemic was declared in mid-March.</p>



<p><a href="https://www.cnbcafrica.com/news/2020/04/09/covid-19-drives-sub-saharan-africa-toward-first-recession-in-25-years-world-bank-report/">Sub-Saharan Africa</a> is projected by the <a href="https://www.cnbcafrica.com/east-africa/2020/05/21/world-bank-approves-500mn-to-aid-africas-fight-against-locust-plague-covid-19/">World Bank</a> to suffer a 23.1% decline in remittances over the course of 2020. To compound the tighter financial conditions for African migrant workers, in the first quarter of 2020, the region continued to have the highest average remittance costs, with the average transfer of $200 charged at about 9%.</p>



<p>Even for those who have maintained the financial capability to transfer money, lockdown measures have impacted access to MTOs (money transfer operators) in receiving countries.</p>



<p>Oxfam and around 90 other NGOs, academics and aid workers recently penned a letter to international bodies documenting the impact of the plunge in remittance payments in Somalia, in particular.</p>



<p>The letter urges the U.S. and European governments to take urgent action to facilitate wiring or other payment settlement mechanisms, and calls on Somali officials, MTOs, international banks and bodies such as the UN to coordinate efforts to boost the accessibility of remittance payments.</p>



<h2 class="wp-block-heading">Somalia: A case study</h2>



<p>Many domestic economies in Sub-Saharan Africa are suffering as a result of shutdowns associated with the coronavirus pandemic, and in some cases dealing with multiple concurrent shocks such as historic <a href="https://www.cnbcafrica.com/east-africa/2020/05/27/locust-plague-covid-19-weigh-on-east-africas-economic-outlook/">locust swarms</a>, droughts, flash flooding or violent insurgencies.</p>



<p>Almost half of all households in Somalia rely on remittances to cover basic needs such as food, water, health care and education. The UN estimates that 4.1 million Somalis are food insecure in 2020, while around 2.6 million are internally displaced and more than a third have insufficient water for their basic day-to-day needs. The country’s total population is just over 15 million, according to World Bank data from 2018.</p>



<p>The above average rainy season anticipated in the coming months is expected to exacerbate the flash flooding which has devastated communities, along with offering ideal breeding conditions for the locust swarms that have affected around 360,000 hectares of land.</p>



<p>Meanwhile, conflict continues to rage between government forces, clan actors and insurgent groups, including notorious terror organization Al Shabaab.</p>



<p>Some MTOs in Somalia have had their bank accounts closed due to bank concerns about exposure to terrorism financing and anti-money laundering regulation, preventing access to their online services, according to the letter. Others have been rendered unable to reach more remote locations of the country, including settlements for internally displaced persons and refugees, the most vulnerable portion of the population.</p>



<p>“MTOs not only provide the only viable mechanism to legally and transparently send money to Somalia/Somaliland, they also serve a dual function in terms of providing letters of credit to Somali traders who come to Dubai, Djibouti and other international hubs to purchase essential food and nonfood items for sale inside Somalia/Somaliland,” the letter explained.</p>



<p>“Across the U.S. and around the globe, Somalis are working hard to support their families back home,” Scott Paul, Oxfam America’s humanitarian policy lead, said in a recent statement.</p>



<p>“Sadly, many have fewer resources to share today, and because of the U.S. government’s irresponsible approach to bank regulation, banks have been scared away from helping Somalis send what they can.”</p>



<p>Paul called on the Treasury Department in the U.S. and governments elsewhere to take urgent action to enable Somali families to cover their “rent, food, medicine and school fees as Covid-19 spreads.”</p>



<p>As of Friday morning, Somalia has 1,828 confirmed cases of Covid-19 with 72 deaths.&nbsp;</p>



<p>Oxfam’s country director in Somalia, Amjad Ali, said the pandemic is “laying bare and exacerbating inequalities” and highlighting that “too many among us are living on the brink.”</p>



<p>“We now need to see leaders step up to support vulnerable communities with the social protection they need and deserve, while also easing the way for families to support each other through hard work and remittance payments.”</p>



<p>This article was first published on CNBC <a href="https://www.cnbc.com/2020/05/29/coronavirus-migrant-workers-struggle-to-send-money-home-during-the-crisis.html">https://www.cnbc.com/2020/05/29/coronavirus-migrant-workers-struggle-to-send-money-home-during-the-crisis.html</a> and is republished with its permission.</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Sub-Saharan Africa to suffer 23.1% decline in remittances in 2020 – World Bank

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<p>The World Bank says despite accelerated progress over the past decade, the world is expected to fall short of the SDG 7 target. In its just-released 2020 edition of the Energy Progress Report, the World Bank says under current policies,&nbsp;an estimated 620 million people would still lack&nbsp;access to electricity in 2030, and&nbsp;85&nbsp;per cent of them will be in sub-Saharan Africa. Makhtar Diop, the Vice President for Infrastructure at the World Bank joins CNBC Africa to discuss the findings of this report.</p>


How COVID-19 impacts access to sustainable energy in SSA

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<p>The World Bank recently announced the first phase of an additional $500 million package to combat the locust invasion in East Africa and the Middle East. According to Moody&#8217;s, though crucial, the support package pales in comparison with the magnitude of the twin shocks that the East African economies face from the pandemic and the locust invasion. Kelvin Dalrymple, vice-President and Sovereign Analyst at Moody’s joins CNBC Africa for more.</p>


Locust plague

Locust plague, COVID-19 weigh on East Africa’s economic outlook

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<p>The World Bank has predicted a global plunge in remittances with sub-Saharan Africa anticipated to record a 23.1 per cent decline from $48 billion last year to $37 billion this year. East Africa is a leading beneficiary of remittances that have been central in propping up foreign exchange reserves and protecting regional currencies from excessive volatility. Sharon Karuga Kinyanjui, Head of East and Central Africa at World Remit joins CNBC Africa for more.</p>


COVID-19 takes toll on SSA diaspora remittances

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<p>According to the World Bank 40 to 60 million people worldwide will experience extreme poverty in 2020 due to the Covid-19 pandemic. The estimates show that 23 million people that will be hit by poverty will be in Sub-Saharan Africa and 16 million in South Asia. Joining CNBC Africa to unpack Zimbabwe’s Covid-19 response is Batanai Matsika, Head of Research at Morgan &#038; Co.</p>


COVID-19 worsens Zim’s economic challenges

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<p>The World Bank says it expects global remittances to drop by 20 percent this year, over the economic crisis brought about by shutdowns initiated to contain the COVID-19 pandemic. Michael Kent, Founder and CEO of Azimo joins CNBC Africa to discuss the implication for sub-Saharan Africa.</p>


How COVID-19 impacts SSA remittances


<p>By Jee-A Van Der Linde – Economist</p>



<p>The World Bank will grant Zimbabwe $7m to help fight the economic damage caused by the Covid-19 pandemic.</p>



<p>The Washington-based lender said it will mobilise $5m from its Global Financing Facility Trust Fund towards the outbreak and redirect roughly $2m from its ongoing Idai Recovery Project to communities in need.</p>



<p>The aid comes at a crucial time and despite Zimbabwe being in debt arears with numerous multilateral and bilateral lenders, which renders the country ineligible for new loans or debt forgiveness.</p>



<p>At the beginning of April, Finance Minister Mthuli Ncube wrote to the IMF as well as other leading international lenders, pleading for financial assistance. With more than half of the population in need of food aid and the entire world facing a health pandemic, conditions in the country have reached an acutely distressing point.</p>



<p>Zimbabwe can no longer go at it alone.</p>



<p>After having settled $107.9m of debt with the IMF in 2016, the country is still indebted to the World Bank, African Development Bank (AfDB), and European Investment Bank (EIB), while significant amounts are also owed to other creditors, both within the Paris Club and outside.</p>



<p>The debt situation is precarious, with total external debt (largely in the form of government debt) having ballooned to over $8bn, according to the Ministry of Finance (MoF).</p>



<p>The reasons for this come down to years of economic mismanagement and frequent policy errors.</p>



<p>That said, Zimbabwe is eager to restructure and repay its debt obligations in order to become eligible for new loans. Minister Ncube has previously said that settling arrears will help elevate the country’s credit standing, but a series of external shocks and policy missteps have impeded the process.</p>



<p>When considering Zimbabwe’s tremendous financing needs, the $7m – ZWL$125m at the current 25:1 fixed exchange rate with the greenback – is but a drop in the proverbial bucket and falls at the lower end of what the IMF and World Bank have afforded other African nations.</p>



<p>Although any bit of aid will help at this stage, Zimbabwe’s problems are far from over and it will need more assistance going forward.</p>



<p>NKC’s analysis shows that Zimbabwe will be among the continent’s main economic laggards this year, joining the ranks of oil producing nations which have arguably been the hardest hit by the global pandemic.</p>



<p>Simply put, Zimbabwe’s economy will suffer a very deep contraction in 2020, akin to levels last seen over a decade ago.</p>



<p>That said, conditions can only deteriorate so far and serious intervention will need to take place at some point.</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Zimbabwe tightens coronavirus lockdown in capital Harare as cases hit 203

Op-Ed: World Bank opens its purse to Zimbabwe, but hands out pennies


<p>HARARE (Reuters) &#8211; The World Bank will grant $7 million to Zimbabwe to help it fight the new <a href="https://www.cnbcafrica.com/videos/2020/04/30/morgan-co-on-covid-19-its-impact-on-zimbabwes-economy/">coronavirus outbreak</a> that is expected to worsen an already struggling economy and <a href="https://www.cnbcafrica.com/news/2020/04/02/the-fight-to-keep-4-1-million-zimbabweans-fed-in-covid-19-lockdown/">food crisis</a>, a bank spokesman said on Wednesday.</p>



<p>Zimbabwe is more than $1.2 billion in arrears to the <a href="https://www.cnbcafrica.com/videos/2020/04/09/world-bank-considers-debt-relief-for-africa-to-fight-covid-19/">World Bank</a>, <a href="https://www.cnbcafrica.com/videos/2020/04/09/afdb-announces-10bn-war-chest-to-fight-covid-19/">African Development Bank</a> and European Investment Bank, making it ineligible for funding or debt forgiveness from global lenders.</p>



<p>The World Bank spokesman said that while Zimbabwe and other countries indebted to the lender could not access regular financing, they could get money from its trust funds to fight the coronavirus that has slowed down the <a href="https://www.cnbcafrica.com/videos/2020/05/05/covid-19-what-the-world-can-learn-from-africa-in-dealing-with-a-pandemic/">global economy</a>.</p>



<p>“The bank’s senior management has underlined the need for additional trust fund financing to ensure that Zimbabwe and the small group of other countries in arrears can receive support as part of our global effort to help countries respond to the COVID-19 crisis,” the spokesman said.</p>



<p>Zimbabwe would get $5 million from the World Bank’s global financing facility trust and another $2 million would be diverted from <a href="https://www.cnbcafrica.com/videos/2020/05/04/how-the-covid-19-pandemic-is-taking-its-toll-on-african-livelihoods/">funds meant to help the country recover</a> from a devastating cyclone in 2019.</p>



<p>“We recognise this is a global crisis that impacts every country and we cannot leave anyone behind in our response,” the spokesman said.</p>



<p>Zimbabwe’s finance minister wrote to the International Monetary Fund and other lenders last month warning that the country was being driven towards a <a href="https://www.cnbcafrica.com/videos/2020/05/04/covid-19-lockdowns-when-is-the-right-time-to-reopen-economies/">health and economic catastrophe</a> by the coronavirus pandemic because its debt arrears mean it cannot access foreign financing.</p>



<p>The impoverished southern African nation has only recorded 34 cases and four deaths from the coronavirus but analysts say its fragile health system will not be able to handle any surge in infections.</p>



<p>(Reporting by MacDonald Dzirutwe; Editing by Mark Heinrich)</p>



<p>This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN22I1QX-OZABS">https://af.reuters.com/article/investingNews/idAFKBN22I1QX-OZABS</a> and is republished with its permission.</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Zimbabwe gets $7m COVID-19 lifeline from World Bank

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<p>Kenya&#8217;s coffee sector received close to $14 million from World Bank, to boost the production of speciality coffee and link farmers to direct markets in order to eliminate the issue of cartels. Moreover, the Capital Markets Authority announced that it will allow listed companies on the Nairobi Securities Exchange to pay dividends without holding annual general meetings. Rodney Omukhulu, Assistant investments Analyst joins CNBC Africa for more.</p>


Kenya receives $14mn World Bank support to boost coffee production

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<p>Nigeria is requesting for a total of $6.9 billion loan from multilateral lenders to counter the impact of the coronavirus outbreak. With Nigeria&#8217;s total debt at 27.4 trillion naira, can the economy sustain more debt at these levels? Egie Akpata, Director of UCML Capital joins CNBC Africa for more.</p>


COVID-19 loans: Can Nigeria’s economy sustain more debt?

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<p>The World Bank expects COVID-19 to cost Sub-Saharan Africa up to $79 billion in lost output in 2020, plunging the region into its first recession in a quarter of a century. World Bank’s Chief Economist for Africa, Albert Zeufack joins CNBC Africa for more.</p>


World Bank considers debt relief for Africa to fight COVID-19

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<p>Never before has the world seen a funding crisis like the one it is experiencing as a result of COVID-19 and lockdowns.  Any new funding available is swallowed up within days. Is this the case with the World Bank and IFC’s $14 billion package? Sérgio Pimenta, IFC’s Vice President for the Middle East and Africa joins CNBC Africa for more.</p>


COVID-19: World Bank & IFC’s $14bn – How far does it extend?


<p>Growth in Sub-Saharan Africa has been <a href="https://www.cnbcafrica.com/east-africa/2020/04/08/how-african-economies-can-survive-the-covid-19-crisis/">significantly impacted by the COVID-19 pandemic</a> and is forecast to fall from 2.4% in 2019 to -2.1% to -5.1% in 2020, the first recession in the region over the past 25 years, according to the World Bank’s latest Africa’s Pulse report.</p>



<p>The report goes on to suggest that economies in Sub-Saharan Africa could lose between $37 billion and $79 billion in output losses in 2020 due to COVID-19.</p>



<p>The following is a statement by the World Bank regarding its latest Africa’s Pulse report:</p>



<h4 class="wp-block-heading"><strong>PRESS RELEASE April 9, 2020</strong></h4>



<h4 class="wp-block-heading"><strong>COVID-19 (Coronavirus) Drives Sub-Saharan Africa Toward First Recession in 25 Years</strong></h4>



<p><strong>WASHINGTON, April 9, 2020</strong>—Growth in Sub-Saharan Africa has been significantly impacted by the ongoing coronavirus outbreak and is forecast to fall sharply from 2.4% in 2019 to -2.1 to -5.1% in 2020, the first recession in the region over the past 25 years, according to the latest Africa’s Pulse, the World Bank’s twice-yearly economic update for the region.</p>



<p>“<em>The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard</em>,” said<strong> Hafez Ghanem, World Bank Vice President for Africa.</strong> “<em>We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term – including calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with COVID 19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security.</em>”</p>



<p>The Pulse authors recommend that African policymakers focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains. They also recommend implementing social protection programs, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sector.</p>



<p>The analysis shows that COVID-19 will cost the region between $37 billion and $79 billion in output losses for 2020 due to a combination of effects. They include trade and value chain disruption, which impacts commodity exporters and countries with strong value chain participation; reduced foreign financing flows from remittances, tourism, foreign direct investment, foreign aid, combined with capital flight; and through direct impacts on health systems, and disruptions caused by containment measures and the public response.</p>



<p>While most countries in the region have been affected to different degrees by the pandemic, real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies – Nigeria, Angola, and South Africa— as a result of persistently weak growth and investment. In general, oil exporting-countries will also be hard-hit; while growth is also expected to weaken substantially in the two fastest growing areas—the West African Economic and Monetary Union and the East African Community—due to weak external demand, disruptions to supply chains and domestic production. The region’s tourism sector is expected to contract sharply due to severe disruption to travel.</p>



<p>The COVID-19 crisis also has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6% in an optimistic scenario and up to 7% if there are trade blockages. Food imports would decline substantially (as much as 25% or as little as 13%) due to a combination of higher transaction costs and reduced domestic demand.</p>



<p>Several African countries have reacted quickly and decisively to curb the potential influx and spread of the coronavirus, very much in line with international guidelines. However, the report points out several factors that pose challenges to the containment and mitigation measures, in particular the large and densely populated urban informal settlements, poor access to safe water and sanitation facilities, and fragile health systems. Ultimately, the magnitude of the impact will depend on the public’s reaction within respective countries, the spread of the disease, and the policy response. And these factors together could lead to reduced labor market participation, capital underutilization, lower human capital accumulation, and long-term productivity effects.</p>



<p>“<em>In addition to containment measures, we have seen that in responding to COVID-19, countries are opting for a combination of emergency fiscal and monetary policy actions with many central banks in the region taking important actions like cutting interest rates and providing extraordinary liquidity assistance</em>,” said<strong> Albert Zeufack, Chief Economist for Africa at the World Bank</strong>. <em>“However, it is important to ensure that fiscal policy builds in space for social protection interventions, especially targeting workers in the informal sector, and sows the seed for future resilience of our economies</em>.”</p>



<p>The authors emphasize the need for a customized policy response to reflect the structure of African economies (especially the large informal sector) and the peculiar constraints policymakers currently face, particularly the deteriorating fiscal positions and heightened public debt vulnerabilities, and the overall low operational capacity to respond.</p>



<p>“<em>The immediate measures are important but there is no doubt there will be need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight COVID-19 and to help manage or maintain macroeconomic stability in the region</em>,” said<strong> Cesar Calderon, Lead Economist and Lead author of the report</strong>.</p>



<p>Due to the COVID-19 pandemic, economic circumstances within countries and regions are fluid and change on a day-by-day basis. The macroeconomic analysis in the report is based on data available by the first quarter of March 2020.</p>



<p>The World Bank Group is taking <a href="https://www.worldbank.org/en/who-we-are/news/coronavirus-covid19">broad, fast action</a> to help developing countries strengthen their pandemic response, increase disease surveillance, improve public health interventions, and help the private sector continue to operate and sustain jobs. It is deploying up to $160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery.</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Africans singled out in southern China sparks diplomatic backlash

COVID-19 drives Sub-Saharan Africa toward first recession in 25 years – World Bank report

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<p>Governments on the continents have put forward strict measures in an effort to fight coronavirus of which, the impact will be greatly felt across the economies. The World Bank and the International Monetary Fund have stressed on the need to provide debt relief to developing countries. Grant Harris, CEO, Harris Partners LLC joins CNBC Africa for more.</p>


How African economies can survive the COVID-19 crisis


<p>By Irmgard Erasmus – Senior Financial Economist</p>



<p>Acutely aware of Ethiopia’s vulnerability to the health and
economic repercussions of the Covid-19 pandemic, Prime Minister Abiy Ahmed
urged “collective leadership and coordinated responses” to overcome the
challenges posed by the unprecedented shock. </p>



<p>The Ethiopian leader has taken a dominant position in the campaign
for comprehensive stimulus packages and debt relief for the African continent,
stressing that “we are not prepared to overcome the virus on our health systems
and the long-term impact on our economies”. </p>



<p>Echoing this concern, a consortium of African ministers of finance
emphasised in a communique dated April 1 that “urgent need” exists “for fiscal
stimulus to contain the crisis”.</p>



<p>On April 1, G20 leaders indicated that they are preparing a
response package for Africa that will include debt relief and financial aid.
The response package will incorporate “recent demands from President Cyril
Ramaphosa of South Africa and Prime Minister Abiy Ahmed of Ethiopia”, according
to Politico. </p>



<p>This also came after the United Nations Economic Commission for
Africa (UNECA) again requested the “urgent and immediate release” of a $100bn
support package to aid domestic response actions in the fight against the
health and economic implications of the Covid-19 pandemic. </p>



<p>While the ministers welcomed the IMF and World Bank’s call for
official bilateral creditors to “provide breathing space” to African countries,
the consortium believes that “such relief should be extended to countries
across the region and by other creditors during this exceptional period”. </p>



<p>A comprehensive $100bn support package for Africa will be
formalised for discussion and presentation at the World Bank and IMF’s
stakeholders’ initiatives on April 15.</p>



<p>For the public sector, disbursements will be utilised for the
servicing of public sector debt and interest payments, including on sovereign
bonds, in order to create “immediate fiscal space and liquidity” for
governments to focus their attention on domestic fiscal stimulus needs amid the
crisis. </p>



<p>The consortium proposes that the $44bn disbursement be pooled into
a global special purpose vehicle (SPV) to be used for external debt service
“for effective management purposes till economic recovery takes hold and
agreement can be reached with creditors”. The ministers stressed that this
measure would guard against default by countries. </p>



<p>The ministers requested the IMF to raise Special Drawing Rights
(SDRs) availability over the next two to three years. The consortium believes
that it would service the debt relief SPV facility and provide crucial
liquidity support.</p>



<p>Ethiopia has already rescheduled debt servicing agreements with
“some major creditors”, which will alleviate hard currency liquidity demands.
By September 2019, public external debt stock stood at $26.8bn, or half of
total outstanding public debt. </p>



<p>Public external debt comprised a 60:40 split between central
government and state-owned enterprises, according to official records. </p>



<p>Public external debt servicing costs amounted to $548.4m during Q1
FY 2019/20 (the fiscal year commences on July 8), of which $457.2m was due to
SOE debt servicing. </p>



<p>Ethiopia has been among the most vocal of African nations to
request debt waivers or debt relief – while African finance ministers called
for a $100bn stimulus package, Prime Minister Abiy Ahmed urged G20 members to
provide $150bn under a proposed three-point action plan. The disbursal should
take the form of supplementary budgetary support, debt relief, and private
sector financing, according to the proposal. </p>



<p>The prime minister furthermore urged G20 nations to support the
World Health Organisation (WHO) and Africa Centres for Disease Control and
Prevention (CDC) in strengthening public health delivery and emergency
preparedness.</p>



<p>Cognisant of the fragility of the private sector, especially as
small- and medium-sized enterprises account for over 70% of the private sector
in Africa, the consortium stressed that liquidity relief should be extended in
particular to service and tourism sectors. </p>



<p>African finance ministers requested support from the G20, EU, and
all Development Finance institutions to support a proposal aimed at the
refinancing, rescheduling, and implementation of guarantee schemes and
liquidity facilities for the private sector. </p>



<p>In particular, African airline companies require preservation and
protection “given their significant contribution to the GDP of Africa”.
Ethiopian Airlines suspended flights to 80 destinations in light of the
pandemic. </p>



<p>Demand for local flights, which are ongoing, dropped by at least
50% already. The airline estimates that it will lose at least $190m due to the
pandemic. </p>



<p>The Ethiopian government has ordered the central bank to release
Etb15bn ($460m) to private banks as it ramped up its fight against the economic
spillover effects of the Covid-19 pandemic. The liquidity injection will enable
the banking sector to extend debt relief and additional loan facilities to
customers. </p>



<p>This came in addition to instructions to avail foreign currency to
importers, with priority given to importers of essential goods or the
manufacturing of essential goods. </p>



<p>In March, the World Bank granted a $500m grant and loan facility
(split evenly) to Ethiopia in support of its reform programme. </p>



<p>The prime minister voiced his gratitude to “the generosity of the
Ethiopian people” as local stakeholders contributed generously to the National
Resource Mobilisation Committee initiative.</p>



<p>NKC African Economics’ preliminary GDP forecast suggests that
Ethiopia will be hit particularly hard by coronavirus-related disruptions. </p>



<p>Absent comprehensive external support, a sharp slump in private
sector demand and investment momentum threatens an unprecedented plunge in
economic growth this year to 1.1% – down from a pre-virus forecast of 7.1%. </p>



<p>Crucially, the pandemic threatens to disrupt progress made under
the reform agenda towards policy overhaul, broad-based privatisation of state
assets, financial liberalisation, and the launch of a domestic bourse. </p>



<p>An uncomfortable reliance on grant relief amid strained domestic
fiscal capacity threatens to bloom into full-blown crisis in the absence of
comprehensive external financial support.</p>


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