Dr. Akinwumi Adesina, President of African Development Bank (AfDB), the recipient of the 2017 World Food Prize, and Professor Joseph E. Stiglitz, recipient of the 2001 Nobel Memorial Prize in Economic Sciences, have called for a quick and comprehensive plan for debt restructuring in Africa.<\/p>\n\n\n
At the launch of the African Development Bank\u2019s 2021 edition of its annual African Economic Outlook, Adesina urged African governments to consider collectively establishing an African financial stabilization mechanism, which would give Africa the fiscal space it needs to deal with debt.<\/p>\n\n\n
Africa\u2019s collective debt now stands at 70% of the continent\u2019s gross domestic product (GDP).<\/p>\n\n\n
\u201cIt is high time that we set up a homegrown financial stability mechanism where we work together to mutualize our funds and ensure we avoid the spillover effects that come from global pandemics or any external shocks,\u201d the head of Africa\u2019s premier financial institution said.<\/p>\n\n\n
\u201cWe must start by making sure that we carry out the macroeconomic policy reforms and the fiscal policy reforms that we need to get done,\u201d he said, adding that Africa \u201cis not looking for a free pass. We are just looking for an equitable way in which Africa\u2019s fiscal space gets dealt with.\u201d<\/p>\n\n\n
The idea was backed by Stiglitz, who proposed an international debt framework.<\/p>\n\n\n
\u201cThat\u2019s a question I\u2019ve been very concerned with for a long time,\u201d said Stiglitz. \u201cYou need debt restructuring, and that needs to be really high on the international agenda.<\/p>\n\n\n
Every country has bankruptcy laws but there\u2019s no bankruptcy law for international debt. When there\u2019s too much debt, it\u2019s as much the creditor\u2019s problem as the debtor\u2019s problem.\u201d<\/p>\n\n\n
Stiglitz added: \u201cWhat needs to be done with debt is comprehensive and quick restructuring.<\/p>\n\n\n
We don\u2019t want to fall into the trap of doing too little, too late.\u201d Stiglitz\u2019s proposal calls for an international debt framework that includes the private sector, given its growing role as a source of government debt.<\/p>\n\n\n
According to the African Economic Outlook, the share of commercial creditors in Africa\u2019s external debt stock has more than doubled in the last two decades, from 17 percent in 2000 to 40 percent by the end of 2019.<\/p>\n\n\n
Some hope has come in the form of new special drawing rights, potentially $500 billion, that the International Monetary Fund could issue, in accordance with the G20\u2019s recommendation at the end of February. <\/p>\n\n\n
Adesina said these funds will \u201cgo a long way\u201d to stabilizing foreign reserves and the exchange rate, allowing countries to handle debt and re-engage in massive pro-growth investments that will help them to quickly recover from the Covid-19 pandemic.<\/p>\n\n\n
Adesina presented a proposed African Financial Stabilization Mechanism, strongly supported by Stiglitz, as a critically needed solution that would allow African countries to agree on a set of convergent macroeconomic policies and principles and pool funds.<\/p>\n\n\n
Adesina said: This will allow us to \u201cdeal with the cause of the illness and not always the symptoms.\u201d<\/p>\n\n\n
The 2021 edition of the African Economic Outlook estimates that Africa\u2019s GDP contracted 2.1 percent in 2020, the continent\u2019s first recession in half a century. GDP is projected to grow by 3.4 percent in 2021.<\/p>\n\n\n
The report estimates that African governments will require additional gross financing of about $154 billion in 2020\/21 to respond to the Covid-19 crisis.<\/p>\n\n
Dr. Akinwumi Adesina, President of African Development Bank (AfDB), the recipient of the 2017 World Food Prize, and Professor Joseph E. Stiglitz, recipient of the 2001 Nobel Memorial Prize in Economic Sciences, have called for a quick and comprehensive plan for debt restructuring in Africa. At the launch of the African Development Bank\u2019s 2021 edition […]<\/p>\n","protected":false},"author":1,"featured_media":3195,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[125,241],"tags":[206],"class_list":["post-28948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-money","category-foreign","tag-debt","has-post-title","has-post-date","has-post-category","has-post-tag","has-post-comment","has-post-author",""],"yoast_head":"\n