tralac Daily News
The COVID-19 SMME Debt Relief Fund is regarded as a double-edged sword by its beneficiaries. This was revealed during a Parliamentary oversight meeting by the Portfolio Committee on Small Business Development in March 2021. While beneficiaries lauded the fund for helping with some financial strain brought on by the lockdown, they want the Department of Small Business Development and the Small Enterprise Finance Agency (Sefa) to either give repayment breaks or scrap them altogether.
While beneficiaries lauded the fund for helping with some financial strain brought on by the lockdown, they want the Department of Small Business Development and the Small Enterprise Finance Agency (Sefa) to either give repayment breaks or scrap them altogether. Lapologa requested that the Sefa award a three to six-month repayment holiday to beneficiaries.
Boosting domestic resource mobilisation is critical for Zimbabwe’s economy going forward as external financing for the country is likely to remain clogged, the African Development Bank (AfDB) has said. Official data shows that the country’s total public debt stands at US$11,1 billion, approximately 53,9 percent of gross domestic product (GDP). And of that total, 95,6 percent is external, which includes $6,4 billion in arrears to international financial institutions, bilateral, and private creditors. “Zimbabwe has been in default since 2000. A Staff Monitored Programme with the International Monetary Fund to help Zimbabwe implement economic policies from May 2019 to March 2020 ended in September 2019.
“The international financial institutions will not resume lending until debt arrears are cleared,” said the AfDB in its Africa Economic Outlook (2021).
Strategy to add value to Zim leather sector chain (The Herald)
The Zimbabwe Leather Sector Strategy (2021-2030) would be officially launched this Friday in Bulawayo with Vice President, Dr Constantine Chiwenga, billed to lead the proceedings. The leather sector is seen as a low-hanging fruit given the country’s competitive advantage in livestock and crop production, which are key sources of raw materials. The Government has earmarked the leather industry for structural transformation along the value chain perspective. The Government approved the new Zimbabwe Leather Sector Strategy last November as part of measures to position the sector for increased domestic value addition and beneficiation so as to promote export-led industrialisation.
Zimra rakes in US$1,3m from cargo tracking (The Herald)
The Zimbabwe Revenue Authority (Zimra) said yesterday it raked in over US$1,3 million last year in cargo sealing fees and associated violation fines. Through its Electronic Cargo Tracking System (ECTS), the tax agency seals and tracks cargo entering and leaving the country in a bid to enforce controls on the importation of restricted or controlled goods. The system is also designed to curb transit fraud and avoid goods being dumped in the country. “Electronic seals are affixed to cargo containers, box trucks, soft sided trucks (flat decks with side curtains), tankers, and break bulk (goods under tarpaulin) the electronic seals send regular signals to the control room to show the location of the cargo,” Zimra said. “The electronic seal connects to the internet and the control room is manned 24 hours a day and relays information of violations to the reaction teams.”
Car import restrictions hailed (The Herald)
THE Government’s decision to restrict the importation of vehicles more than 10 years old has the potential to see the accrual of huge economic benefits, players in the motor industry have said. The Government, last week gazetted regulations that gave legal effect to the Government’s decision to restrict vehicles older than 10 years as a means to revive the once vibrant local car industry. Such a ban on used cars is not unique to Zimbabwe as several other jurisdictions restrict such imports.
Mystery over US disclosure of Sh139bn Kenya loan deal deepens (Business Daily)
A US-listed firm at the centre of a disputed Sh139.5 billion (1.06 billion euros) loan deal with Kenya has made fresh disclosures to the American stocks regulator that the Treasury has dismissed as fake and containing forged signatures. Kallo Inc reckons in the new disclosures to the Securities Exchange Commission (SEC) that Kenya has frozen the contract for building mobile clinics and upgrading hospitals in the wake of the coronavirus crisis. The filings with SEC were done on March 25, just two days after the powerful SEC suspended the Canadian firm from trading in the United States for failing to shed light on its earlier disclosure of the Kenya loan agreement.
Biden team set to review Kenya, Trump trade talks (The East African)
The Biden administration will review bilateral trade negotiations and targets that ex-President Donald Trump regime made with Kenya last year over a potential free trading deal. The new US administration wants to make sure that the negotiations for a bilateral trade agreement and talks objectives are consistent with Biden’s $4 trillion revamp of the American economy that focuses on a muscular industrial policy with an eye on fighting climate change. This means that the start of the trade talks could be delayed and the objectives of the bilateral pact recast to recognise Biden’s agenda with some of the aims of the negotiations set by the Trump administration likely to be dropped.
Kenya hit out at the United Kingdom after London added the east African country to its coronavirus travel ‘red list’. In a strongly-worded statement on Saturday, Kenya’s foreign affairs ministry said the decision was ‘discriminatory’ and lacked ‘logic and scientific knowledge of the disease or the spread of the pandemic’. On Friday, the UK announced new travel restrictions against travelers from Kenya saying it had established the South African coronavirus variant was fast spreading locally in the country. The decision means that Kenyans or anybody transiting through Kenyan airports is banned from setting foot in the UK starting on April 9. On Sunday, Nairobi responded with its own measures, banning passenger flights originating or transiting through UK airports for a month. In addition, passengers from the UK will be required to produce negative Covid-19 certificates and valid Covid-19 vaccine certifications.
Only cargo flights are exempt from the ban. But crew members will be required to present both a vaccination certificate and a negative PCR certificate. The measures take effect on April 9.
Kebs develops fresh trade rules for miraa sector to boost market (Business Daily)
The Kenya Bureau of Standards (Kebs) is developing a code of practice for the miraa sector, in what stakeholders say offers a ray of hope for the stimulant that is banned in some countries. The standards, according to industry players, will go a long way in seeking markets for the crop. According to the draft regulations seen by the Business Daily, the standards of procedures of practice include ensuring hygiene is observed in the entire chain from harvesting to packaging as well as loading into vehicles and aircraft. The Kebs says the Kenya Code of Practice for the Miraa (Khat) Industry has been developed by the national workshop on miraa under the guidance of the Standards Projects Committee. “This code stipulates the hygienic and safety requirements during the production, handling and marketing of miraa. The standard also considers the safety provisions for consumers and workers in the industry,” the agency says in the preliminary draft,
Biden Administration Dampens Kenya’s Hopes for Bilateral Trade Deal (The Maritime Executive)
The Biden administration’s plans to review foreign trade policy and refocus it on America’s economic recovery have thrown long-running free trade negotiations with Kenya into disarray. In a development that casts doubts on the future of a bilateral free trade agreement (FTA) with Kenya, United States Trade Representative Katherine Tai has informed Kenyan Minister of Industrialization, Trade and Enterprise Development Betty Maina of the U.S. government’s plans to review trade negotiations started by the Trump administration in order to align them with President Biden’s goals. “Ambassador Tai highlighted her ongoing review of the negotiations to ensure that any agreement aligns with the Biden-Harris administration’s Build Back Better agenda,” said Tai’s office in a statement following a virtual meeting with Maina. “The Biden administration will prioritize trade policies that have tangible benefits for all working Americans, families and communities.”
Go for best US trade deal (Business Daily)
Fresh negotiations for a bilateral trade agreement with the US give Kenya another opportunity to ensure the best outcome for its citizens. Kenya wants a deal before the expiry of the Africa Growth and Opportunity Act (Agoa), which allows sub-Saharan African countries to export thousands of products to the US without tariffs or quotas until 2025. Nairobi’s negotiators should take into account concerns raised by Kenyan firms and civil society about the recently concluded Kenya-UK trade deal. They should tread carefully especially on tariffs and quotas since these will greatly shape the future of trade with the US after 2025. Proposals by the US Chamber of Commerce such as elimination of Washington’s tariffs on imports of steel and aluminum from Kenya in exchange for expanded access to Kenyan market should be carefully weighed. The negotiators must also be alert to what an expanded access of US to local market would mean for the competitiveness of local firms.
The fears that Nigeria might become a dumping ground for manufactured goods, especially with the advent of the African Continental Free Trade Area (AfCFTA), has heightened as Nigeria’s Trade in Goods Statistics show rising deficit in manufactured goods trade. Analysis of the Foreign Trade in Goods Statistics of the National Bureau of Statistics (NBS) from the fourth quarter of 2019 (Q4 2019) to Q4 2020 revealed a steady increase in the value of imported manufactured goods compared to exports in consecutive quarters. Stakeholders in the manufacturing sector are apprehensive that without strict enforcement of rules of origin when the AfCFTA becomes fully operational, Nigeria may end up a dumping ground for foreign manufactured goods.
In June 2016, members of the Economic Community of West African States convened for a two-day workshop in Abuja. The sole aim was to chart ways to transit into using low sulphur fuels in their respective countries. At the end of the event, Nigeria, Benin, Togo, Ghana and Côte D’Ivoire agreed to ban the importation of Europe’s dirty fuels, thus limiting sulphur in fuels from 3000ppm to 50ppm. The United Nations Environment Programme (UNEP) said the move would help to drastically reduce vehicle emissions and help over 250 million people to breathe safer and cleaner air. By the end of that year, Nigeria again hosted a sub-regional high-level ministerial meeting on low sulphur fuels, which was held in Abuja and hosted by former minister of environment, Amina Mohammed.
The Director-General/Chief Executive, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), Dr. Dikko Umaru Radda, has assured that its furniture cluster park, currently under construction at the Industrial Development Centre (IDC), Idu, Abuja, will on completion in 2021, enhance the competitiveness of micro, small and medium scale enterprises (MSMEs) in the country and boost efforts to diversify the economy. He pointed out that by design, clusters provide economies of scale by having shared infrastructure and common facility for small businesses, adding that this will have spill off effects on other enterprises.
Recently the federal government announced the designation of five international airports as free trade zones to support the implementation of both the African Continental Free Trade Area (AfCFTA) and Single African Air Transport Market (SAATM) agreements. These airports include the Murtala Muhammed International Airport (MMIA), Lagos; Nnamdi Azikiwe International Airport (NAIA), Abuja; Mallam Aminu Kano International Airport (MAKIA), Kano; Port Harcourt International (PHIA), Omagwa, and Akanu Ibiam International Airport, Enugu. The Minister of Aviation, Senator Hadi Sirika said that the facilities at these airports would be upgraded to meet international standards so that they would compete effectively with the best facilities in Africa.
Ghana by virtue of its geographical location has been placed among the biggest beneficiaries of the African Continental Free Trade Agreement (AfCFTA), a former Oxford University professor, Noel Tagoe has said. He is therefore urging the Ghanaian banking industry to team up with its counterparts on the African continent so as to fully benefit from the AfCFTA. Ghana, he projects, will become a subsidiary hub for many multinationals. But for that to be possible, he wants transportation infrastructure to be made a priority to facilitate trading activities. “You cannot import and export without transportation infrastructure. So for those of us who are at the coast, we need very good ports to be able to handle big projects; ensuring that ports work very well is important. Therefore those who are inland [landlocked countries] need other means of carrying freight such as rail, road or air infrastructure -those are pretty costly – there should be an air agreement over Africa,” he said.
AS Nigeria continues to toy with its auto policy, Ghana, another West African country, is demonstrating a willingness to successfully pursue its automotive development plan. The African Association of Automotive Manufacturers, AAAM, hosted an exploratory visit by automotive component manufacturers to Ghana in the first week of March. The objective was to introduce potential investors to the Ghanaian automotive market. The initial visit was focused on aftermarket opportunities, which in time will also support original equipment assembly as the volumes grow, as currently almost all components are imported.
TANZANIA is on course to double its handling capacity of petroleum products and begin supplying of the product to Zanzibar and neighbouring countries when expansion work at Tanga port is completed. Tanzania Ports Authority (TPA) which is handling the port is undertaking a number of projects in the country’s ports, as part of its efforts to improve service delivery and increase government revenues. TPA Director General, Deusdedith Kakoko (suspended) told former Vice-President Samia Suluhu Hassan, in Tanga recently that Tanzania is supplying six million tonnes of fuel and that the ongoing strategies will double the capacity as a result of winning the market in Zambia, Malawi and the Democratic Republic of Congo.
The government last week secured a $130m (Shs472b) loan syndicated by local commercial banks as its initial financial commitment to the proposed East African Crude Oil Pipeline (EACOP) to run from Hoima in mid-western Uganda to the Tanzanian Indian Ocean port of Tanga. Of the $130m, $70m (Shs254b) is the first instalment of the $233.5m (Shs848b) and $60m (Shs220b) was to offset historical costs; expenses met previously by French Total E&P in pre-project construction activities. Uganda’s equity stake in the pipeline is 15 per cent, equivalent to $233m.
The West African nation, the world’s top cocoa producer, is entering its rainy season, which runs from April to mid-November. Overcast skies are becoming more common across the country, and farmers are expecting heavier rains to follow suit. “If the rains are abundant and regular this month and next month, the quality of the beans will be better compared to last season,” said Salame Kone, who farms near Soubre, the heart of Ivory Coast’s cocoa belt.
African regional and continental news
THE Council of Ministers of the Southern African Development Community (Sadc) has urged member states that have not yet signed and ratified the African Continental Free Trade Area (AfCFTA) and the Common Market for Eastern and Southern Africa-East African Community-Sadc (Comesa-EAC-Sadc) Tripartite Free Trade Area (TFTA) to do so to allow for the implementation of the agreements. The call follows a recent virtual SADC Council meeting, which was chaired by Mozambican Foreign Affairs and Cooperation Minister, Verónica Nataniel Macamo Dlhovo, in her capacity as the chairperson of the council. While noting progress on the signature of the Comesa-EAC-Sadc TFTA, the regional leaders stressed that its signing and ratification was critical as it will pave the way for the successful implementation of the AfCFTA.
Regional ministers have since called for urgent action by member states towards finalisation of negotiations on rules of origin on some sensitive tariff lines and agreement on some customs documentations, and accession to AfCFTA by Sadc member states, including those participating in the customs unions.
Emmanuel Obinne, West Africa Head of Growth and Partnerships at BPC Banking Technologies is advocating for a robust payment system for trade under the African Continental Free Trade Area. This according to him is crucial in averting any attempt by fraudsters to take advantage of loopholes in the various payment systems. He was speaking in an interview on the new approach by fraudsters in the wake of the COVID 19 pandemic. “I am actually excited about the Free Trade Area being set up and here we are talking about multi-country trading and this will lead to an increase in the volume of digital payments obviously,” he said. Obinne added, “Now because nations are involved in these transactions, I believe that the setting up of business-to-business market places run by the governments among these countries whereby those who are trading under the platforms are brought under one eco systems are averted just as Alibaba, … so you can protect the buyer and seller.”
Africa’s Trade Revolution Needs Peace by Hippolyte Fofack (Project Syndicate)
The African Continental Free Trade Area (AfCFTA), which came into effect in January, could be a game changer in helping to lift the continent out of poverty and onto the path of long-term prosperity. The AfCFTA has the potential to accelerate and alter the composition of foreign direct investment in Africa, thereby diversifying the continent’s sources of growth and boosting its internal and external trade. And merging Africa’s relatively small markets into one of the world’s largest will enable investors to capitalize on greater economies of scale. But Africa risks squandering this huge opportunity unless its leaders can address the continent’s unwelcome reputation as one of the world’s most conflict-prone regions. According to the World Bank, nine African countries currently suffer from high institutional and social fragility; 12 are engaged in medium or high-intensity conflicts. Unsurprisingly, the number of conflict-related deaths in the region has surged from 2,200 in 2010 to an average of 14,000 per year since 2014. Transnational terrorist networks have recently intensified the problem.
The negative impact of wars on trade can be long-lasting. Globally, violent conflict is estimated to cause a 26% reduction in exports in the year that hostilities begin, rising to 35% five years later and 58% after a decade. Across Africa, where the median duration of conflict is about four years, the negative spillovers of wars on trade could persist in the medium and long term.
High-intensity conflicts also hinder trade and economic integration indirectly by triggering a sharp rise in military expenditures. African military spending grew by 17% over the last decade, to $41.2 billion in 2019, according to the Stockholm International Peace Research Institute.
This report details how African Union and Africa Centres for Disease Control and Prevention (Africa CDC) has collaborated with the UNDP to help curb the spread of COVID-19, support African home- grown solutions and make way for socioeconomic recovery that can lead to a path towards attaining Agenda 2063 and the Sustainable Development Goals (SDGs).
Uganda joins neighbours in seeking $750m in new loans (The East African)
East African governments are seeking to borrow more than $750 million in syndicated loans to counter the adverse economic impact of the Covid-19 pandemic. Kenya, Uganda, South Sudan, and Tanzania have all been in the market in the past two months seeking either syndicated loans or special drawing rights from the International Monetary Fund (IMF), as they seek to stabilise economies experiencing pandemic-induced shocks. Last week, Uganda became the latest African sovereign to seek a syndicated loan, following in the footsteps of Tanzania. The EastAfrican understands that Kampala launched a $200 million seven-year syndicated facility into the market, led by French lender Société Générale and the Eastern and Southern African Trade and Development Bank (TDB).
Apply higher tariffs on non-EAC goods to grow industries (Business Daily)
The establishment of an effective Common External Tariff in the East Africa region will lead to the exponential growth of the manufacturing sector. A Common External Tariff (CET) is an import tariff or rate adopted and applied by countries within a common market. This tariff is ideally imposed on imports from non-member countries, with the intention of promoting industrialisation in the common region, enhancing the economic development of member States and liberalising regional trade. The EAC is reviewing its CET that, if adopted, will steer manufacturing as we grapple with Covid-19.
EAC women need help on cross-border trade revamp (Dailynews)
WOMEN within the East African Community (EAC) are in need of facilitation support in cross-border trade after suffering huge loss due to lockdown and travel restrictions imposed by some regional member states. Following the outbreak of Covid-19 pandemic, some countries have restricted movements within and outside their territories, compelling women entrepreneurs to use informal routes. The Eastern African Sub-Regional Support Initiative for the Advancement of Women (EASSI) Executive Director Ms Sheila Mishambi noted that the impact of Covid- 19 on cross-border women traders across East Africa had been immense, forcing closure of at least 64.2 per cent of women-owned businesses. A report on the study carried out since the outbreak of the pandemic in the six member states indicates that around 21.2 per cent of the sampled women reported using informal routes to circumvent the existing Covid-19 measures in EAC partner states, with several narrations of tragic consequences. The report released by the TradeMark East Africa (TMEA), the study provides lessons and suggestions to EAC governments, donors, private sector and other stakeholders for future strategies to navigate the impacts of the coronavirus, from women surveyed and interviewed.
IOM rescues cross-border traders (The Herald)
The International Organisation for Migration (IOM) has started rolling out support programmes to mitigate the effects of Covid-19 pandemic on informal cross-border traders in the Sadc region. In a statement, the organisation’s Zambian office said the support initiative will include holding a series of visits, training sessions and goods distribution activities at key border posts. Most of the ports of entry, IOM said, were part of supporting informal cross-border traders in Southern Africa to do business safely during the Covid-19 project. “Informal cross-border trade which accounts for up to 40 percent of total intra-SADC trade, with an estimated value of US$17,6 billion has been adversely affected by the pandemic because of border closures and travel restrictions throughout the region,” said IOM. “These measures have had a negative impact on the livelihoods of informal cross border traders as they are unable to conduct their trade normally.”
India, Mauritius FTA to come into effect from Apr 1 (Business Standard)
Several Indian products will enjoy the benefit of greater market access at concessional duties in Mauritius as the free trade agreement signed between the two countries will come into effect from April 1, the commerce ministry said on Wednesday. India and Mauritius signed the Comprehensive Economic Cooperation and Partnership Agreement (CECPA), a kind of free trade pact, on February 22. “Both sides have completed their internal legal procedures and the India-Mauritius CECPA will enter into force on Thursday, 01 April 2021,” the ministry said. The pact covers 310 export items for India, including food and beverages, agricultural products, textile and textile articles, base metals, electricals and electronic item, plastics and chemicals, and wood.
The Dubai Chamber of Commerce and Industry’s representative offices in Africa recently organised a webinar in cooperation with Oxford Business Group and the Pan African Chamber of Commerce and Industry, which covered some of the key benefits of doing business in Africa. The virtual event, attended by 163 participants from the UAE and Africa, aimed to familiarise UAE companies with the competitive advantages offered by several promising African markets, the evolving business climate on the continent, as well as new investment opportunities and existing challenges to foreign investors.
Addressing participants, Omar Khan, Director of International Offices at Dubai Chamber, highlighted the importance of Africa as a preferred market for Dubai, and pointed out that many UAE-based companies have established their presence on the continent.
Nine business ideas to pursue in Africa: Poultry, cannabis, vocational training and more (How We Made it in Africa)
There is an opportunity to provide locally-produced packaging materials for Ethiopia’s horticulture industry. Here are nine business opportunities on our radar, as highlighted by top African entrepreneurs and investors.
1. Tapping into demand for poultry in Angola and Mozambique
2. Vocational training in Côte d’Ivoire.
3. Production of cannabis products in South Africa.
4. Co-living spaces for young professionals in Lagos and beyond.
5. Export of niche fast-moving consumer goods (FMCG) from West Africa to the United States.
6. Production of essential oils in East Africa
7. Alternative protein from insects
8. Packaging materials for Ethiopia’s horticulture industry
9. Private care facilities for the elderly in Ghana
Foreign Aid And Corruption – Age-Old Problems In Africa (Front Page Africa)
African countries have been receiving FORIEGN AID since independence for the past 60 years, and Africa is yet to be developed or self-reliant. Since 1970, the world has spent over five trillion dollars in aid. Much of that money has come to Africa. Helping Africa is a noble cause, but the campaign has become a theater of rampage corruption, and abuse of power. The Marshall Plan was an American initiative passed in 1948 for foreign aid to Western Europe. The goals of the United States were to rebuild war-torn regions, remove trade barriers, modernize industry, improve European prosperity. However, it hasn’t been the case in Africa. Foreign Aid has contributed to corruption in Africa through the large amounts of money that are sent over, and exploitation of resources. The money that floods into Africa come not only from individual government-to-government aid programs, but also international partners such as the World Bank, WTO, and the IMF, which act as intermediate between the donor governments and receiving governments.
A vibrant, robust, and mutually beneficial relationship between the United States and Africa underpins the Biden-Harris Administration’s Build Back Better objectives of facilitating an inclusive economic recovery, sustaining, and creating jobs for U.S. workers, eradicating COVID-19, and combatting climate change. Furthermore, active re-engagement with African countries and international organizations committed to Africa’s prosperity and development will buttress the United States’ commitment to restore alliances and leadership multilaterally. The Corporate Council on Africa (CCA) welcomes the Biden-Harris Administration’s appeal to African Leaders to rebuild relationships premised on equal partnership and mutual trust, respect, and prosperity. We commend President Biden for making his commitment to reengage the African Union early in his Presidency. The President’s remarks before the 34th Meeting of the African Union are a welcome tonal and policy shift for U.S.-Africa relations. CCA supports the Administration’s early signs of pursuing an active Africa strategy that matches the continent’s strategic importance for the U.S. in achieving its global economic and security objectives.
Japanese firms rank Kenya top investment spot (Business Daily)
Kenya is the most attractive destination for Japanese firms seeking to make new investments in Africa, a survey has shown, beating the continent’s larger economies like South Africa and Nigeria. The survey, carried out by Japan External Trade Organisation (Jetro) on Japanese-affiliated companies in Africa, found that over a third (35.1 percent) of polled companies cited Kenya as their preferred future investment destination in Africa. The East Asian country affiliated firms cited Kenya’s position as the economic hub of East Africa, with many emerging start-up companies offering big potential for collaboration.
Global economy news
Starting a new job is always daunting. For Ngozi Okonjo-Iweala, who just weeks ago started a new stint as director general at the World Trade Organization, the timing could not be more trying: she is taking over the world’s largest global trade body amid once-in-a-generation public health and economic crises that have emboldened protectionist inclinations around the world. Who is Ngozi Okonjo-Iweala, and how has her worldview shaped her politics and policymaking?
DG Okonjo-Iweala said: “The technical assistance activities which France is supporting will provide developing countries and LDCs with essential skills and knowledge so that they may more effectively participate in multilateral trade, including trade negotiations, and achieve meaningful outcomes for the people they serve. I welcome France’s continued generosity.”
France’s Minister of the Economy, Finance and Recovery, Bruno Le Maire, said: “France is convinced that the WTO has a major role to play in the wake of the economic crisis. We need to move forward on a number of reforms so that the WTO can play its role again in easing trade tensions and settling disputes, so that every country can reap the benefits that international trade offers, including developing countries. Our discussions with the Director-General focused on transforming and improving the WTO’s Appellate Body, on clarifying and respecting multilateral trade rules, and on strengthening the WTO’s role in the fight against global warming. Trade must serve sustainable development. France is committed to limiting the impact of global warming on a global scale, and to supporting developing countries in this effort, through the strengthening of their industrial and commercial capacities.”
The big issues at play in the IMF and World Bank spring meetings (Atlantic Council)
This week’s spring 2021 meetings of the International Monetary Fund (IMF) and World Bank are taking place as the global economy recovers strongly but unevenly from the COVID-19 crisis, posing difficult questions about how to deal with the impacts of the pandemic and implement support measures.
Key issues for discussion include determining how to steer fiscal and monetary policies in the period ahead so as not to prematurely withdraw support for the recovery while not validating rising inflation expectations; finalizing arrangements for a general Special Drawing Rights (SDRs) allocation and commitments to channel surplus SDRs from high-income countries to low-income ones; making more progress in the Group of Twenty (G20)-sponsored Debt Service Suspension Initiative (DSSI) and Common Framework (CF) for Debt Treatments beyond the DSSI to assist highly indebted low-income countries; and addressing potential financial-stability risks posed by money-market and hedge funds.
IMF, World Bank Must Support Developing Countries’ Recovery (Inter Press Service)
The COVID-19 pandemic continues to take an unprecedented human and economic toll, wiping away years of modest and uneven progress towards the Sustainable Development Goals (SDGs). Developing countries now need much more support as progress towards the SDGs was ‘not on track’ even before the pandemic.
By end-2022, average incomes are expected to be 18% below pre-crisis levels in low-income countries (LICs) and 22% less in emerging and developing countries excluding China – compared to 13% lower for developed economies. These lower incomes will push hundreds of millions into extreme poverty and hunger, surviving on incomes under US$1.90/day. The World Bank estimates the poor increased by 119–124 million in 2020, and by 143–163 million more this year.
Rich countries must open the way to cheaper mass-produced COVID-19 vaccines in order to protect every person in the world and avert a $9 trillion “worst case” global economic catastrophe, said Oxfam today. They should also agree this week to inject $650 billion more into the global economy to help developing countries cope with the pandemic’s already devasting effects.
The two issues – one around tackling the chronic global scarcity of vaccines that is now sparking trade disputes between and economic shocks among countries, and the other in agreeing a new allocation of Special Drawing Rights (SDRs) – will feature at the World Bank and International Monetary Fund’s (IMF) Spring Meetings April 5-11.
The International Monetary Fund announced Monday it would not ask 28 of the world’s poorest countries to make debt payments through October, extending its relief period as Treasury Secretary Janet Yellen said she’s worried 150 million people could be pushed into extreme poverty because of the Covid-19 pandemic. The payments will be paused to “continue to help free up scarce financial resources for vital emergency health, social and economic support to mitigate the impact of the Covid-19 pandemic,” the Washington, D.C.-based financial organization said.
The Executive Board of the International Monetary Fund (IMF) approved on April 1, 2021 a third tranche of grants for debt service relief for 28 member countries under the Catastrophe Containment and Relief Trust (CCRT). This approval follows two prior tranches approved on April 13, 2020 and October 2, 2020, respectively (see Press Releases 20/165 and 20/304). It enables the disbursement of grants from the CCRT for payment of all eligible debt service falling due to the IMF from its poorest and most vulnerable members from April 14, 2021 to October 15, 2021, estimated at SDR 168 (US$238) million. This tranche of grants for debt service relief will continue to help free up scarce financial resources for vital emergency health, social, and economic support to mitigate the impact of the COVID-19 pandemic. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for the remaining period through from October 16, 2021 to April 13, 2022 amounting to a total of about SDR 680 (US$964) million.
World Bank president David Malpass said on Monday he expects China, the United States and other Group of 20 (G20) major economies to extend a freeze in bilateral debt service payments until the end of 2021 when they meet this week. The G20 Debt Service Suspension Initiative (DSSI) has already helped countries defer some US$5.7 billion in payments until the end of 2020, with another US$7.3 billion in deferred payments expected until June, according to World Bank data. Extending the debt payment freeze until the end of the year would save even more money that countries could use to combat the coronavirus pandemic and support their economies, Malpass told reporters, but gave no specific estimate.
US targets $650b in reserves to help low-income countries in Covid-19 crisis (The East African)
The US Congress is set to approve $650 billion in global reserves or Special Drawing Rights held by the International Monetary Fund. The funds will provide temporary financial relief to low-income countries, especially in Africa, hard hit by the coronavirus pandemic. Africa urgently needs an economic relief package that includes loan restructuring, debt relief and a reallocation of SDRs from rich countries to navigate the challenge of a health and economic crisis. Last week, Rwanda’s President Paul Kagame reaffirmed that a new issuance of SDR would enhance liquidity but called for a system of accountability for how SDRs are used, as well as a method of allocating them according to need rather than quota. “Recovery from the Covid-19 pandemic depends on adequate fiscal space and liquidity. However, there is a sharp dividing line in today’s world. Some countries can finance their own recovery through quantitative easing. The rest must borrow from private or public creditors, much as individuals do. Without corrective action, this divergence will entrench a profoundly unequal global order, in which the poor have no chance of ever catching up with the prosperous,” President Kagame said during a virtual meeting on international debt architecture and liquidity.
A new study analyzing bean production and food security across 11 countries in sub-Saharan Africa, found COVID-19 pandemic-related restrictions to significantly impact bean production. Border controls and high transport costs have led to drops in production of the key food security crop, threatening to reverse gains made in achieving Sustainable Development Goals 1 and 2, towards no poverty and zero hunger, respectively.
Climate, COVID-19, and the Developing Country Debt Crisis (NewClimate Institute)
The triple COVID-19, economic, and climate crisis poses a growing challenge to debt sustainability and financing for climate action. There are growing calls to look for solutions for the three crisis together, notably through “debt-for-climate” swaps. Though not a general panacea, such proposals may represent an attractive option for both debtors and creditors. As an input into this ongoing discussion, this working paper proposes several potential broad criteria and proxy indicators as a starting point to identify countries where such debt swaps could be piloted, potentially with lessons learned to be expanded to a growing number of countries.
The estimated accumulated cost of the pandemic, in terms of gross domestic product (GDP) losses by the end of 2021, will amount to $227 billion. The MENA region is expected to recover only partially in 2021, but that recovery is, in part, dependent on an equitable rollout of vaccines.
This edition of the World Bank MENA Economic Update for Spring 2021 estimates that the Middle East and North Africa (MENA) region’s economies contracted by 3.8% in 2020, which is 1.3 percentage points above the World Bank forecasts in October 2020; however, the regional growth estimate is 6.4 percentage points lower than the pre-pandemic growth forecast published in October 2019.
The substantial borrowing that MENA governments incurred to finance health and social protection measures increased government debt. Countries must continue spending on health and income transfers, which will add to already high debt burdens and lead to complicated policy decisions after the pandemic recedes.