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African Ministers called for urgent deployment of financial instruments as continent suffers impact of the Russia/Ukraine war

21 April, 2022
African Ministers called for urgent deployment of financial instruments as continent suffers impact of the Russia/Ukraine war

Washington, DC, April 21, 2022: Members of the Africa High-Level Working Group on the Global Financial Architecture (the Group) coordinated by United Nations Economic Commission for Africa (UNECA) and comprising African Ministers of Finance, Planning and Economic Development, the IMF, the World Bank and key African stakeholders – African Development Bank, African Union, Afreximbank - met during the 2022 Spring meetings in Washington, DC to discuss Africa’s urgent financial needs amid the war in Ukraine.

African Ministers of Finance, Planning and Economic Development called for urgent action matching the magnitude of the impact of the war in Ukraine, akin to the response to the onset of the Covid-19 pandemic. To avoid losing the gains of decades of development, the international community should urgently deploy a range of existing financial instruments that will promptly provide additional liquidity and policy space for African nations to help support their populations and preserve social stability. Africa is the region of the world most exposed to the threat of food insecurity for millions.

The Ministers put forth the following asks that will provide urgently needed near-term support to Africa as it grapples with the crisis. The below-stated asks were also echoed by Ministers during the Africa Consultative Group (ACG) meeting chaired by IMF’s Managing Director Ms. Kristalina Georgieva held later that day.


Debt service relief and restructuring

Provide debt service relief from IMF for the worst hit poorer countries. The Ministers call on the IMF to offer debt service relief to the poorest countries exposed to the shocks, similarly to the relief offered at the onset the pandemic via the Catastrophe Containment and Relief Trust (CCRT).

Extend G20 Debt Service Suspension Initiative (DSSI) for two years. The Ministers ask that the G20 members extend the Debt Service Suspension Initiative for two more years to help create fiscal space for urgent spending for a group of the most affected poorest countries.

Make the G20 Common Framework for debt restructuring quickly operational by revising the procedures for operalization. The Ministers also request that the G20 modify the Common Framework for debt restructuring to be effective, fast-tracked and broad- based by revising the procedures and including commercial creditors. It should also be applied for debt reprofiling for liquidity problems, in addition to debt restructuring.

Waive IMF’s extra surcharges for 2 to 3 years during the crisis. Surcharges are estimated at $4bn in 2022 alone and are imposed on countries with large borrowings on top of interest payment and fees.


Fresh financing and liquidity

Rapidly extend new financing from the IMF. Ministers also request that the IMF quickly consider requests for new programs and augmentations of existing programs. In addition, the IMF should make full use of its emergency financing instruments where appropriate, as it did during the onset of the pandemic, and temporarily increase access limits on emergency financing until 2025. Further, the IMF should call for the issuance of new SDRs.

Quickly redeploy committed but undisbursed funds from Multilateral Development Banks (MDBs).

Fund the PRGT subsidy account.

Make available emergency funds through the Crisis Response Window Emergency Response Financing (CRW ERF) through the World Bank’s IDA19 and IDA20 financing. Frontload IDA20.

Ministers called for a strong replenishment of the African Development Fund (ADF), and support for the leveraging of ADF equity through capital markets borrowings.

Leverage the AMSP/AVAT procurement model by African Union (AU), Afreximbank, UNECA, UNICEF, Africa CDC and World Bank Group for items of first priority such as grains and fertilizer, among others.

Support of liquidity enhancing initiatives like the Liquidity and Sustainability Facility (LSF) which support market access at more affordable rates.


Enhanced SDR re-channeling

Finally, the Ministers ask for enhanced SDR re-channeling, which would entail increasing pledges from $60 billion to $100 billion. Expediting the allocation of the committed $60 billion to the Poverty Reduction and Growth Trust (PRGT) and to the new Resilience and Sustainability Trust (RST), would help ensure that these Trust Funds are fully funded for the prompt response. Moreover, the RST should be quickly operationalized and its design improved by broadening the trust’s scope and eligibility criteria, including by delinking the RST from the need to have an IMF program.

Recapitalize Multilateral Development Banks (MDBs), especially African Public Development Banks (PDBs), and add to the list of prescribed SDR holders. Channel a portion of SDRs to MDBs (like African Development Bank) that are SDR prescribed holders; they will leverage the SDRs received 3 to 4 times, support the recapitalization and financing of African PDBs, increase development financing and address the looming food crisis.

Taken together, these efforts would help the most affected countries quickly mobilize resources to respond more forcefully to the food and energy price shock, without undermining efforts to address structural challenges and longer-term fiscal sustainability. The Group is also working on longer-term proposals to make the GFA work better for Africa.