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Urgent need for an Emergency Fund from International Community
It is near certainty that if COVID19 is not contained in the short run, Africa will, on average, endure negative GDP growth per capita. The growth rate is expected to decline by 2-3%, arising from cumulative impact on the demand and supply factors in the different areas of labour markets, tourism, foreign direct investment, currency markets, trade and the budget. Inflation is also expected to pick up. The challenges, at hand, forecast to manifest to the magnitude of previous global recession like the 2008 Global Financial Crisis or even more. And uncertainty prevails on how long, it will take to bring this under control. Among many downsides, will be shortfalls in revenue both commodity revenue and international trade (mainly import) revenue.
Africa, therefore, has to take immediate action to avert and mitigate the immediate and potential chronic downside effects of COVID. The SDGCA recommends and reiterates
- The call on action for emergency fund response from multilateral financial institutions and bilateral partners. The emergency financing will aim to meet two objectives: a) deal with health challenges caused by the coronavirus (COVID-19) pandemic b) provide short term macroeconomic stabilization response as well as backstop the expected fiscal stimuli without causing domestic distortions, particularly through domestic borrowing and monetization of fiscal deficits.
- A fiscal response that is consistent with the already expansionary monetary policies adopted by some Central Banks. Policy coordination is essential to avoid downsides of fiscal dominance and denting of central bank independence
- Coordinated response to the Covid-19 pandemic also voiced by African finance ministers – calling for an economic stimulus of USD 100 billion in International aid. While, this is over and above the current emergency commitments, it is imperative the current commitments trickle down to intended beneficiaries.
- Investment in the capacity to absorb/invest by African governments to avoid the fungibility/inefficient use of the international aid.
The failure for Africa to respond effectively to this pandemic will be a global failure and could have chronic effects on the global economy. We must think together and ethically act in unison.
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