By Haruna Gimba
As the G20 leaders met in Bali, Indonesia for the Finance Ministers and Central Bank Governors meeting, African Ministers of Finance, Planning and Economic Development and Central Bank Governors have called for swift and decisive collective action to address the growing food insecurity on the continent.
This was contained in a letter signed by Amadou Hott, Senegal’s Minister of Economy, Planning and International Cooperation, Mohamed Ahmed Maait, Minister of Finance Arab Republic of Egypt and Ken Ofori-Atta Ghanian Minister of Finance.
The trio said the G20 must urgently deploy all available financing mechanisms to save lives and strengthen financial and social stability.
“We cannot overstate the urgency with which the food crisis should be addressed, and we ask for immediate liquidity support akin to the global response during the COVID-19 pandemic to help support our economies.
“In the course of the last two years, Africa has been hit by three exogenous shocks that have reversed hard-won socio-economic gains, undermining our combined efforts to protect the vulnerable and achieve our dream of a prosperous Africa.
“First, the COVID-19 pandemic ravaged economies and livelihoods across the continent. Then, just as countries were on the path to recovery, the war in Ukraine sent food, fertilizer and energy prices spiralling.
“Compared to 2021, import bills for key products, such as wheat, maize and crude oil, have doubled for many countries on the continent. Most recently, interest rate hikes in advanced economies have been driving up borrowing costs for African governments and the private sector, leading to the weakening of currencies,” the letter stated.
The ministers further stated that the tightening of global financial conditions is expected during the coming months, with dire implications for the fiscal space of many low- and middle-income countries.
They posited that none of the crises was as the result of poor macroeconomic decisions by African countries. “On the contrary, good macroeconomic policy fundamentals have helped many countries weather the storm over the last two years. Those muddling through need support too.”
The African Ministers of Finance, Planning and Economic Development and Central Bank Governors also called call for urgent action akin to the response to the onset of the COVID-19 pandemic.
The letter partly read, “We call on the G20 ministers to urgently deploy the tried and tested menu of existing financial instruments that helped stave off the last crisis. This crisis is worse and fast-moving.
“The G20 should promptly provide additional liquidity and policy space for African nations to help support their populations and protect their economies.”
The letter signed by the three ministers to the G20 sought for tasks that will urgently provide needed support to Africa as it grapples with the external shocks.
“New general allocation of SDRs, equivalent to the 2021 allocation of $650 billion. The war in Ukraine has led to a rise in food, fertilizer and fuel prices.
“As such, African countries need liquidity now to respond to the livelihood pressures. We ask that the G20 supports a new SDR issuance that countries can use to shore up their currencies and address pressing import needs.
The encashment cost of SDRs is significantly cheaper than going to the markets, especially now, and will help Africa access urgently needed liquidity. A commitment to a new issuance will allow countries to begin to make purchase orders for grain, food and fertilizer and create buffers for the fall and winter seasons.
“Extend the G20 Debt Service Suspension (DSSI). The end of the G20 DSSI in December 2021 meant that countries are due to resume payments on their debt obligations despite a deteriorating global context, particularly for middle and low-income economies on the African continent.
“Given the new crisis, we ask that the G20 members extend the DSSI for two more years and reschedule the deferred interest payments for over 5 years. The DSSI created over $12.9 billion of additional fiscal space for countries in need, and a deferment of this would allow countries space to manage the new emerging crisis while planning for a more orderly debt service obligation process.
“We also call on the IMF to offer debt service relief to the poorest countries exposed to the shocks, as done before at the onset the pandemic, including via the Catastrophe Containment and Relief Trust (CCRT).
“For low and middle-income countries, the IMF should waive surcharges for countries with large borrowings. Further, to reduce the cost of debt and to extend maturities, we call on the G20 to review the OECD rules on export credit financing among others.
On climate
The ministers stated that as the world build towards COP27, the G20 should support a transparent market mechanism for carbon pricing.
They also asked the G20 to lift all restrictions on IFIs so that they can fund gas projects on the continent.
“Gas is an important element of health security, as well as over three million people die a year from poor cooking stoves, with women and young children being especially exposed.
“In addition, we ask that enough resources to finance climate action in Africa are allocated towards adaptation, mitigation and development and take into account Africa’s diverse needs and ambitions to fight climate change. As African countries, we remain committed to our Paris obligations.”
Food and Fertilizer
The ministers urged the G20 to work to re-intergrate Ukrainian grains and Russian grains and fertilizers into the world markets and ensure that no party to transactions, especially with Africa as a destination, is sanctioned.
“This will reassure all banks, traders and insurers and allow them to complete transactions and stabilize markets.
Africa to have a permanent seat in the G20
There is also a call for increase Africa’s representation in the G20 with at least one permanent seat.
“Increasing the continent’s representation in the G20 deliberations will allow for continuity and a more responsive engagement. African countries together host 17 per cent of the world population today with a combined GDP of nearly $2.7 trillion, the 8th highest in the world.
“Having Africa as a member through the African Union, will strengthen the G20. Taken together, these efforts will create the fiscal space for countries to support their populations without undermining efforts to ensure longer-term fiscal sustainability and resilience.
“They will reduce human suffering, save lives and enhance global stability – common goals that we know the G20 is fully committed to,” the letter concluded.
