Nigeria and other African countries have agreed to protect the most vulnerable in the society in their various countries. The agreement was reached at the African caucus meeting with the International Monetary Fund Managing Director. A statement by the IMF said “We agreed that the top priority must be to protect the most vulnerable households from the impact of high food and energy prices. But the external shock is hitting the continent at a time when most countries have limited fiscal space, with high debt vulnerabilities and increased risks. In this challenging context, targeted, temporary, and transparent support to vulnerable households using and further developing social safety nets would be the most appropriate solution.
“For this effort to succeed, governments in the region, the international community, and the private sector should make concerted efforts to mobilise revenue and additional financing to support the recovery and implement needed reforms to promote inclusive and sustainable growth, achieve diversification, tackle the climate crisis, and transition to a green economy. The IMF has been playing its part and reformed its concessional lending toolkit for low-income countries to provide greater flexibility to the access levels. It provided emergency financing to countries with urgent balance of payments needs, debt service relief under the Catastrophe Containment and Relief Trust (CCRT) to the most vulnerable countries and enacted an historical Special Drawing Rights (SDR) allocation. The SDR allocation boosted liquidity and reserves around the world. About US$34 billion were allocated to countries in Africa, equivalent in some countries to as much as 6 percent of GDP.
“The IMF has just established a Resilience and Sustainability Trust, which will be operationalised later this year, funded by SDRs voluntarily channeled from donor countries. It will complement the IMF’s existing lending toolkit by providing longer-term affordable financing to address longer-term challenges, including climate change and pandemic preparedness. The ACG welcomed initial pledges of about $40 billion toward financing the RST, and encouraged other contributors to make additional pledges to ensure the RST is well-positioned to support African countries to address their long-term challenges and build resilience.
“The group also underscored the need to address rising debt vulnerabilities of developing countries, particularly in Africa and find effective ways to alleviate the weight of the debt service. It also stressed the need to continue working together to strengthen the debt resolution architecture, including by improving the Common Framework for debt treatments and technical assistance within the Multipronged Approach (MPA) to address the remaining capacity requirements. Our discussions on Africa’s challenges and prospects for recovery have been very fruitful. Today the green shoots of the recovery that started in 2021 are threatened by the war in Ukraine at a time when the war on COVID-19 is still not over. Vaccination rates on the continent remain low and uneven, although some progress has been made in recent months. At 13.2 percent of its population, sub-Saharan Africa remains the region with the lowest vaccination rates in the world, and at 28.1 percent, North Africa’s average rate is also still below the world average.
“The surge in commodity prices triggered by the war in Ukraine has destabilised global commodity markets, exacerbating both inflationary pressures and food security concerns, especially for the most vulnerable who are already scarred by the pandemic. Several countries in North Africa and the Sahel are among the most vulnerable in the world to price increases or shortages of wheat since they are highly dependent on imports from Russia and Ukraine. Although the continent’s fuel and commodity exporters will experience a windfall gain, the positive fiscal impact could be largely offset by additional energy and food subsidies. In contrast, high food and energy prices are straining commodity importers’ external and fiscal balances. Capital flows are also likely to be disrupted.
