Rebuilding Africa and strengthening its resilience against future economic shocks post COVID-19

After demonstrating its resilience during the Ebola outbreak and the global financial crisis, Africa is once again facing a severe test of its strength and agility because of the coronavirus pandemic. The good news is that the continent has entered this crisis in reasonably good shape following decades of progression in health, education, and economic outcomes.

As of early 2020, macroeconomic fundamentals in Africa were improving, with investments, rather than consumption, accounting for more than half of the region’s growth. Inflation was falling and the continent was making impressive strides towards accomplishing the United Nations Sustainable Development Goals (SDGs). Africa must build on the momentum and strive to prevent the coronavirus pandemic from reversing the gains of the past 20 years.

Admittedly, that’s easier said than done: despite their best efforts, many countries still struggle with fragile health systems, high debt levels, weak external balances, as well as high rates of poverty and unemployment. The African Development Bank now projects that Africa will fall into a recession in 2020 with economic growth contracting by at least 1.7 percent. In a worst-case scenario, this figure could turn out as high as 3.4 percent.

The coronavirus pandemic threatens to increase the debt burden of African countries from 60 percent to 70 percent of gross domestic product, heightening the likelihood of a sovereign debt crisis. The additional financing required to cushion the consequences of the crisis could be in excess of $150 billion.

In a part of the world where 85 percent of the population earn their living in the informal sector, unemployment as a direct result of the coronavirus pandemic could push an additional 28 to 49 million people into extreme poverty. Moreover, if we fail to take adequate action, the impact of the crisis on food insecurity and malnutrition maybe even worse than anticipated.

To counter the fallout of the coronavirus pandemic, Africa needs robust policy responses from every country on the continent, paired with strong support from Africa’s development partners. In the short term, African countries should prioritise healthcare spending for the provision of essential personal protective equipment (PPE) and materials, acceleration of local production of medical supplies including PPE and vaccine and drug discovery.

Targeted cash transfers and subsidies for vulnerable households as well as subsidies and tax relief for businesses should be high on the agenda.

More money should be earmarked for scientific, economic and social research. Countries should pursue global and continental partnerships to prepare for eventualities. Private sector growth and revamping education and labour markets for the future of work are also key.

The role of development partners

At the onset of the coronavirus pandemic, multilateral development institutions took immediate action to help Africa’s poorest countries navigate the crisis and help them on the road to recovery. The African Development Bank is playing its part through its USD 10 billion COVID-19 Rapid Response Facility (CRF). The CRF offers immediate relief to African countries to address the crisis by providing additional resources for public health interventions, social protection programs, and liquidity and budget support to affected sectors of their economies.

Civil society and think tanks have a useful role to play by helping to build trust, solidarity, and uptake of COVID-19 prevention and containment measures. They can also help to ensure that COVID-19 interventions are carried out equitably and that governments are held accountable for their policies and actions.

Original source: AfDB