The Chair of the African Consultative Group (ACG) made the plea to the Bretton Woods Institutions (BWIs) prior to the upcoming 2020 Spring Meetings
Below is the full statement (April 2020)
We, members of the African Consultative Groups (ACG) of the International Monetary Fund (IMF) and World Bank Group (WBG), take note that, following the COVID-19 pandemic and unfavorable developments, the 2020 Spring Meetings will occur in a virtual format. They will be limited to IMFC, DC, G-20 ministerial meetings, as well as management and flagship press conferences. Consequently, and with a view to maintain close dialogue with the management of Bretton Woods Institutions (BWIs) and to share our common concerns and priorities, as well as our efforts to address recent shocks, including the COVID-19, we have taken the option to issue the current Statement in place of our traditional meetings.
First, we thank the Managing Director of the IMF for her response to our 2019 Memorandum. We welcome both institutions’ focus for the 2020 Spring Meetings on the COVID-19 pandemic, and we salute the Development Committee (DC)’s inclusion of rising debt vulnerabilities and disaster risk management on its agenda. Like elsewhere in the World, as recognized in the IMF Managing Director’s latest correspondence to the African Caucus Chair, the African Continent is also taking robust measures to address the public health emergency as well as the economic and financial impact of the COVID19 pandemic. In line with the IMF’s recommendations, our countries have taken (or are in the process of putting in place) supportive and appropriate macroeconomic policies and macroprudential measures -within the limits of our capabilities and in a coordinated fashion. The pandemic will have significant implications on debt vulnerabilities and revenue collection of our countries, which need to be addressed together. Weak public health systems and low buffers in many African countries run the risk of an enormous humanitarian crisis on the continent. This situation will require close monitoring and adequate support. Our continent must also continue to pursue its development agenda beyond the current crisis, by (i) strengthening economic resilience, including against climate change; (ii) promoting private sector development; (iii) enhancing domestic resource mobilization and curbing illicit financial flows; and (iv) accelerating job creation and economic transformation. The support of the WBG and IMF remains critical for us to achieve timely and positive results, which are commensurate to the expectations of the populations.
I: Strengthening Health Care Systems and Addressing the Impact of COVID-19
We commend the IMF and the World Bank for their early announcements, that they stand ready to help. Both institutions’ rapid, judicious and flexible use of existing facilities and instruments to support governments’ efforts to address the human tragedy and the economic fallout from the pandemic is crucial. To this end, we call on the WBG and IMF to quickly operationalize the emergency financing reforms, streamline the prerequisites for rapid assistance, and simplify and speed up the processes for disbursement, while pursuing sound macroeconomic management for sustainable growth and poverty reduction.
The outbreak of COVID-19 is posing an unprecedented challenge to the most developed health care and disease surveillance systems of the globe, and more acutely to fragile ones. At the time of writing this statement, most African countries have already reported suspected COVID-19 cases, and the number of confirmed cases is on the rise. In addition to the adverse effects of internal containment measures on our fiscal and external positions, our countries are already incurring significant spillovers from the global public health crisis through trade, financial and commodity price channels. The policy and financing support need to be framed within that context.
On the other hand, as we endeavor for collective action, to cushion countries and boost market confidence, we insist on the imperative need for the Bretton Woods Institutions (BWIs) to preserve the diffusion of clear messages to the membership on ways to mitigate the adverse impacts of COVID-19. Previous experiences with epidemics and pandemics support the importance of timely and significant support to strengthen health care systems, to avoid dealing with intermittent outbreaks of diseases. Ambitious short-term objectives need to be well defined, effectively monitored and anchored into a medium- to long-term framework to realize robust health care systems.
We call on the Bank to scale up its work with countries in the framework of the Human Capital Project, recognizing the potential for further methodological refinements, including through the development of comprehensive disaggregated data on health and education, in cooperation with relevant agencies. More specifically, the Bank is encouraged to:
Accelerate the design of health care systems to help countries respond to recurrent shocks and outbreaks. We expect the Bank to consistently engage during tranquil times, but encourage accelerated engagement now to help countries develop health care systems that can respond to pandemics and shocks in a timely and efficient manner. This requires constant dialogue with countries, access to reliable data and crisis monitoring systems;
Support the development of health institutions and sustainable systems. This requires the Bank to accelerate its work on institution-building to support health systems, particularly in Sub-Saharan Africa (SSA), where capacity constraints remain severe and administrative structures largely deficient, underfunded or nonexistent;
Increase health care engagement in SSA; by scaling up efforts in financing and providing internal incentives for SSA countries to develop health systems that protect their poorest populations and prepare for pandemics and aftershocks;
Provide immediate short-term emergency budget support to countries. We welcome the Bank’s proposal to use more DPFs to adequately address the immediate and long-term negative economic impacts. We stress the importance of ensuring flexibility and quick disbursement, for the DPFs to achieve the intended purposes in a timely fashion, particularly on the poor and vulnerable. Furthermore, we call for the support to poorest and fragile countries to be provided on grant terms.
Strengthening partnership with key UN agencies, other stakeholders and countries would be key to leveraging resources and maximizing the World bank CODIV-19 response. In this regard, we welcome the WBG ‘commitment to collaborate with the IMF, other MDBs and the broader international community in its support to countries and in the delivery of is interventions. We also call on the Bank to work closely with Regional centers of disease control (CDCs), given the potential critical role they can play in strengthening systems and surveillance.
We call on the IMF to further deepen assistance to all our countries and more intensely to conflict-affected and fragile states. It should provide the necessary policy advice and financing support to help countries address the immediate challenges posed by the COVID-19 outbreak. The Fund should notably:
Provide macroeconomic policy advice calibrated for urgent, sizeable and targeted support to the health sector. The Fund should lay out such recommendations in the areas of fiscal, monetary, financial and macroprudential policies as well as capital flow measures, especially in countries where financial markets are underdeveloped and/or are already stressed;
Accelerate the implementation of its agenda on fragile states as recommended by its Independent Evaluation Office (IEO) and framed in the Management Implementation Plan. This includes institution building; capacity development; program design giving room for social objectives, including in the health sector; and adequate financial support, notably swift disbursements under: (i) the recently enhanced rapid facilities (RCF, RFI); (ii) debt relief under the Catastrophe Containment and Relief Trust (CCRT); and (iii) the increase of access under existing arrangements;
Meet the expected increased financing needs of African countries across income levels and regardless of program and arrears status, in line with its mandate. We urge the IMF to adopt an inclusive approach to accommodate all our countries in need, including those in arrears, countries with stalled or off-track Fund programs, and LICs facing debt distress or high risk of debt distress, and;
Ensure that its existing instruments of support are adequately resourced. We welcome the Managing Director’s proposal to mobilize resources for the CCRT, beyond recent contribution pledges, in order to meet debt relief demands caused by the COVID-19 crisis. We encourage the IMF in its fundraising efforts. Moreover, given that the PRGT resources is likely to be under stress, we urge the institution to make the case with the international community on the need to replenish the concessional Trust. We also call on the entire membership to consider a general SDR allocation as an exceptional measure to cope with these extraordinary circumstances.
II: Addressing Debt Vulnerabilities and Financing Needs
The Bank and the Fund should deepen their analysis of the debt implications of the pandemic, while updating guidance on debt policies and management, as well as facilitating knowledge sharing by countries. We anticipate significant economic costs of COVID-19 associated in part with the impetus to strongly invest in prevention as well as preparedness. This, coupled with the oil price shock, will create significant financing gaps, particularly in our oil exporting countries. In view of the multiple consequences of COVID-19, we strongly suggest that the fight against the pandemic be considered as an action of global public good.
The uncertain magnitude of COVID-19’s adverse impacts requires not only innovative approaches; but a call to a swift action. We therefore welcome the joint call made by WBG President and IMF Managing Director to the G20 and all official bilateral creditors to help all IDA, small states and middle income countries (MICs) countries through debt relief, allowing them to concentrate their resources on fighting the pandemic. We further call for debt forgiveness for the African countries and make a plea to G20 leaders and other creditors to allow African countries to suspend all repayments of official bilateral credit in order to provide fiscal space to combat COVID-19. The Fund must stand ready to respond to the increased demand for resources from our countries. World Bank’s assistance also needs to be provided to all countries indiscriminately, with an appropriate package for those in non-accrual status with IBRD and IDA.
We also see room to expand support for improving the efficiency of public spending through more effective public investment management frameworks, as well as enhancing institutional capacity for debt management and reporting. Our countries will need to have the appropriate tools to prioritize growth-enhancing expenditures, while maintaining well-targeted human capital and social spending.
Regarding transparency, actions that incentivize and assist borrowers to compile comprehensive data on public debt and guarantees must be harmonized and complemented with strengthened data transparency by creditors based on global principles and standards for lending. We also underscore the importance of strengthening debt resolution frameworks at this juncture.
As you know, our economies not only share common challenges, but also confront diverse socio-economic circumstances. Against this backdrop, the Bank and the Fund must develop more country-tailored financial and technical assistance programs to promote growth and strengthen resilience to shocks.
We invite the Fund and the Bank to carefully devise the new debt limit policy (DLP) and the details of the SDFP to avoid penalizing unduly countries that will need to recourse the most to external financing to recover from the shock of the pandemic. The terms of the financial support to be awarded to member countries under the IMF’s rapid facilities (RCF, RFI) and debt-relief assistance under the CCRT may need to be revised to allow for longer grace periods and ensure that actual access levels are appropriate to make a tangible change in depressed economies.
III: Enhancing Domestic Resource Mobilization and Curbing Illicit Financial Flows
Strengthening domestic revenue mobilization (DRM) remains critical to achieving the Sustainable Development Goals (SDGs) by 2030. Despite progress on this front, revenue collection remains far below potential, underscoring the need to reinforce tax systems and administrations, broaden tax bases, improve the business environment, and combat capital flight, tax evasion, and tax avoidance. We urge that both institutions remain engaged in African countries and provide tailored technical assistance to strengthen their tax administrations. In addition, while our countries are pursuing efforts towards increasing spending efficiency, including through better prioritization and selection of projects, the Bank through its convening power and the Fund through its catalytic role should advocate to development partners for the provision of resources on more concessional terms and grants where pertinent
The magnitude and complexity of illicit financial flows (IFFs) with inextricable contours calls for a strong political resolve and international cooperation and coordination. We call on the Bank and the Fund to strengthen coordination with destination countries and other international financial institutions (IFIs) to address this challenge. To this end, prioritizing, developing and implementing an international framework that expedites reversal of transfers of IFFs from the continent will be of critical importance.
IV: Promoting Private Sector Development in Africa
Africa’s overwhelming deficit in infrastructure provision, amounting over US$100 billion per year, hampers the continent’s economic transformation, its development prospects, and its capacity to provide jobs for the teeming youthful population, reduce fragility and discourage emigration. With significant fiscal pressures, even more so in the aftermath of the COVID-19 crisis, the public sector lever will remain insufficient to address these issues. This makes the role of private sector even more imperative.
With the help of the WBG and other development partners, client countries have identified some job triggers such as tourism, agro-processing and commercial agriculture, or light manufacturing like textile and garment, petrochemicals. It would be timely to incentivize additional reforms and encourage leapfrogging. This can be done with effective IMF’s and WBG signaling and catalytic roles to crystalize into massive impactful investments in Africa. The narrative of lack of sponsors or fragmentation of projects in Africa should be resolved, as we will move into a new, hopefully post-COVID-19 decade in which global supply chains may be remodeled.
While the WBG rightly tapped in the PSW IDA18 allotment to the emergency first response to the pandemic, going forward, enhanced mechanisms to support recovery through the private sector will be needed. We particularly call the management of the Bank to consult with IDA Deputies and Borrower Representatives on ways to increase access to the PSW while maintaining financial safeguards.
In view of the foregoing, we stand ready to engage further with the World Bank and IFC on the importance and ways of (i) recalibrating the risk appetite framework; (ii) introducing flexibility in the operational requirements and greater footprints for the IFC to lead with MIGA closely complementing; (iii) closing infrastructure gaps; (iv) tackling the connectivity challenge; (v) leveraging the continent’s advantages to promote transformative projects; (vi) addressing paucity of bankable projects; and (vii) deepening capital markets.
V: Accelerating Job Creation and Economic Transformation
Despite the progress made in recent years towards economic transformation, most economies in Africa remain commodity-based, and are characterized by low productivity, poor trade connectivity to global value chains, limited access to markets, high vulnerability to commodity price shocks and jobless growth. In addition, to harness Africa’s demographic dividends, we need to create sustainable jobs by investing in human capital while accelerating the pace of economic transformation.
We appreciate the ambitious set of policy commitments under the IDA19’ special theme on Jobs and Economic Transformation (JET) and welcome the decision to increase the theme’s focus on operational impact. For Africa, this is an opportune time for the WBG to make a strong impact and move the needle to address the constraints to the Continent’s structural transformation. In this regard, a sound strategic framework on JET will be an agenda fit for purpose, which maximizes the institution’s comparative strengths and commitment to a more focused delivery. Devising a clear institutional arrangement to reinforce the implementation of the framework will help strengthen this focus. We also urge the IMF to explore options on program design and conditionality to better accommodate the objectives of job creation and economic transformation. We look forward to furthering discussions on this issue.
Attn: David Malpass, President of the World Bank Group
Kristalina Georgieva, Managing Director of the International Monetary Fund