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Fiscal stimulus remedy needs debt relief/restructuring for africa
Africa finds itself at cross roads. In the face of a pronounced risk of debt stress, it remains a largely poor continent with immense needs to invest not only in people but also in infrastructure. These, however, are long term investment needs. The recent COVID19 pandemic brings a new dimension and has heightened fiscal vulnerabilities attributed to external factors including falling commodity prices that have weakened fiscal revenues and growth. Among the needed and quicker remedies is ‘fiscal fire power’ in an epoch of potential decline in revenue. The envisaged increased recurrent spending pressure and protracted revenue streams will likely result into widening fiscal deficits. So how will African economies survive this while providing fiscal and macro stabilization?
The SDGCA recommends the following:
- Immediate, quick and global financing response to African governments. More specifically, we reiterate the call for action on the G20 to ring fence financing for struggling economies in Africa. The current commitments to aid for OECD DAC is less than half the commitment of 0.7% of GDP.
- African governments desist from printing money. This is double-edged sword, and will only worsen the fiscal pressure in the long term.
- Call on Governments to improve debt utilization and return on public debt investments.
- Reinforce the call by African ministers on restructuring of debt, particularly related to freezing interest payments; extend debt relief to fragile and high debt stress economies. The recent debt relief to Somalia was swift and commendable.
- Put in place a framework for an orderly debt resolution mechanism in the context of more diffuse creditor base and other new features of the debt.
- Joint coordination between stakeholders (government and financiers/partners) in understanding the financing needs associated with COVID19 response.
Fiscal response by governments should be now, and requires fast-paced global response. No country has the fiscal capacity to stand alone.
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