IMF Managing Director Kristalina Georgieva in a meeting with President of Senegal Macky Sall.
By Kristalina Georgieva et Macky Sall
Dakar — International Monetary Fund Managing Director Kristalina Georgieva visited Democratic Republic of Congo and Senegal last week, where she met with the current and upcoming chairs of the African Union. In this guest column, she and Senegal’s President Macky Sall envision ways to boost African recovery from the severe economic and social disruptions of today’s global crisis.
The new Omicron variant has served as a stark reminder that, even after two long years, the COVID-19 crisis is far from over. As we met in Dakar last week, there was a great deal of uncertainty for Africa and for the world. We are all in this crisis together.
After the worst slump on record, Africa’s economy is recovering. Growth is expected to reach 5.1 percent this year and 3.9 percent in 2022. But the story is not simple, with the recovery path becoming more uncertain.
Massive vaccine inequity is a tax on all countries and on our ability to put the pandemic behind us.
Africa’s vaccinations lag while the disease mutates, inflation climbs, and tightening global financial conditions threaten to increase the region’s borrowing costs and further limit its policy space. Indeed, as policy makers ponder the future, uncertainty is rapidly – and regrettably – becoming the new normal.
How can Africa navigate this uncertainty?
Speed up vaccinations
The IMF, World Health Organization, World Trade Organization and World Bank formed a task force that set out the goal of vaccinating at least 40 percent of people in every country this year and 70 percent by mid-2022. While some countries have achieved high vaccination rates, overall just seven percent of Africans have been fully vaccinated compared with 68 percent of people in advanced economies.
Just over seven percent of Africans are vaccinated, contrasted with nearly 70 percent in advanced economies.
As Omicron’s emergence demonstrates, the massive inequity in access to vaccines is a tax on all countries and on our ability to put the pandemic behind us.
For Africa to reach 70 percent next year, the international community must accelerate existing dose donations to the Covax [international vaccine-sharing] facility, and to swap doses with Covax and the African Union, so that countries in the region have the vaccines they need and the means to deliver them. A funding gap of roughly US$23 billion remains to be filled to provide all countries with the necessary vaccines, tests, treatments, and personal protective equipment.
Equally important, countries should eliminate trade restrictions on vaccine exports and on critical vaccine inputs, which would permit far greater manufacturing of COVID-19 vaccines within Africa.
With more support and better access to materials, African facilities like the Institut Pasteur could do so much more.
Senegal’s Institut Pasteur de Dakar is already part of an Africa-wide health sciences community that is making invaluable contributions to global health—including, most recently, discovering and sequencing the new variant. With more support and better access to critical vaccine inputs, African facilities like the Institut Pasteur could do so much more to fight the present pandemic and future health emergencies.
Anchor the recovery in sound public finances
Beyond the health crisis, securing the recovery will be a complex task, requiring policymakers to make difficult trade-offs to meet people’s immediate and long-run needs, while avoiding excessive debt. Achieving this balance is never easy, but it is more challenging than ever in today’s uncertain environment. Each country’s course will be guided by its own circumstances, including economic growth, inflation pressures, budget space, and its ability to attract public and private financing.
At the same time, some policies will benefit all countries, such as establishing credible fiscal policy frameworks looking several years out. Having clear plans to make spending and revenue more balanced can help lower borrowing costs, which would increase policymakers’ flexibility to handle unexpected shocks while advancing longer-term development goals.
The international community must step up to reduce Africa’s recovery-fund gap.
Raising more revenue through steps like broadening the tax base while supporting society’s most vulnerable will also help, as will continued efforts to bolster transparency and accountability of government spending. Senegal’s Medium-Term Revenue Mobilization Strategy, which aims to raise domestic revenue to 20 percent of GDP by 2024, is a good example.
The IMF is a full partner in the regional reform journey, through policy advice, financial support, and capacity development.
In parallel with these domestic actions, the international community must step up. It is of paramount importance to increase multilateral and bilateral funding to reduce the $520 billion financial gap for Africa’s recovery. On-lending some of the new Special Drawing Rights issued by the IMF in August will help. We reiterate the call by African and European leaders at the Financing for Africa summit in Paris last May that $100 billion of this reserve currency be directed toward Africa. And in light of the growing debt pressures in 60 percent of the African countries, it is urgent to instill confidence in the G20’s Common Framework for debt treatment, as well as put in place a road map to help other countries facing debt challenges.
Steer a course to a resilient and inclusive economy
Even in the face of an uncertain outlook, we are undeterred in our belief in the ‘African Century’. The continent, already the world’s youngest, is projected to add a billion people – half the world’s population growth – in the next 30 years.
This offers the region and the world an unparalleled opportunity: it embodies a growing pool of human talent seeking new ways to better themselves and their communities. Developed properly, Africa promises to be one of the planet’s most dynamic and important regions.
The key, of course, is jobs.
A growth- and investment-friendly business climate is crucial to harness Africa’s potential. It will be advanced by open, contestable markets and more reliable electricity, along with other comprehensive reforms including broader financial inclusion and greater integration with international markets. Investing in connectivity and education, including digital literacy, in every community can help ensure that technology makes economies more inclusive.
Jobs are necessary – and an opportunity – for a youthful continent.
More broadly, the world is embarking on a profound transition towards low carbon and climate resilient growth. This effort is critical for the planet and for stability of economies. It is also a huge opportunity to put the world and Africa on a new sustainable growth trajectory. But this transition is costly – at least initially – for a region that already strives to finance other Sustainable Development Goals. And so, the burdens must be shared fairly by the international community. Advanced economies must meet their financial commitment from the Paris climate agreement and accelerate technology transfers.
As a youthful continent, aspiring to a bright future, Africa can navigate the uncertain times ahead with transformational reforms at home and robust international support. Today we pledge to work together to make that bright future a reality.
Kristalina Georgieva (@KGeorgieva) is Managing Director of the International Monetary Fund. Macky Sall ( @Macky_Sall) is President of Senegal.