New Deal for Africa by European, African leaders to stimulate $33bn SDRs for continent post-Covid recovery plan

…IMF: Africa needs $285bn post-Covid recovery additional financing

Ben Eguzozie, in Port Harcourt

A ‘New Deal for Africa’ proposed at the just-concluded Paris African Financing summit looks to get Africa access to $33 billion in Special Drawing Rights (SDRs) for its post-Covid-19 recovery and sustainable growth plan.

The leaders who were drawn from France (host), other European countries and institutions, UAE, Saudi Arabia, African Union, with 20 African countries’ presidents, expressed concern that COVID-19 pandemic has taught that one can no longer treat seemingly faraway crises as distant problems.

“What happens anywhere can affect people everywhere. That is why addressing the impact and legacy of the pandemic in Africa is so important,” the leaders led by President Emmanuel Macron of France (host), Paul Kagame of Rwanda and Macky Sall of Senegal said at the Paris summit.

Clearly, Africa could overcome the pandemic and bounce back – and lead the world toward a new cycle of sustainable growth: it has the world’s largest working population who are enterprising and innovative young people, is a market of more than 1.3 billion people, a combined GDP of more than $3.4 trillion, resource-rich which can supply a local industrial base, today regarded as the last frontier, and a highly ambitious continental integration project – the AfCFTA.

Under the ‘New Deal for Africa’ the leaders believe the first test of the initiative is access to Covid-19 vaccines through COVAX, the vaccine pillar of the international community’s Access to COVID-19 Tools (ACT) Accelerator, and the African Vaccine Acquisition Task Team, hundreds of millions of doses will be delivered to Africa in the months ahead.

They adduce that vaccination is the world’s most important economic policy at this moment: its benefits are measured in trillions, its cost in billions. It is the highest-yielding investment in the short term.

To this end, they spoke of need to mobilize innovative financial instruments to increase funding for the ACT Accelerator to reach Africa’s vaccination coverage target of 60-70% by the Africa Centres for Disease Control and Prevention; and IMF to recognize the use of special drawing rights (SDRs, the Funds unit of account) to finance this effort; and arrange large-scale investment in health, education, and the fight against climate change.

“We must allow Africa to ring-fence this spending from outlays for security and infrastructure investment, preventing the continent from falling into a new cycle of excessive debt,” the Paris summit leaders said.

Realising that Africa needs a positive confidence shock, the Paris summiteers consolidated an agreement on a new $650 billion allocation of SDRs, $33 billion of which will go to African countries. Two voluntary commitments were made: to mobilize SDR allocations of other countries for Africa by re-channelling $100 billion freed up for Africa (and vulnerable countries elsewhere); African institutions to be involved in the use of these SDRs to support the continent’s recovery and progress toward achieving the 2030 Sustainable Development Goals.