News & Analysis: Fiscal policy
COVID-19 Africa Watch talks to State Minister Yasmin Wohabrebbi about the policy response to the pandemic, the efforts to develop the digital economy, and the G20 Debt Service Suspension Initiative (DSSI).
“International credit-rating agencies perennially assign overinflated risks to Africa, irrespective of its improving macroeconomic fundamentals or the global economic environment. These ‘perception premiums’ are one of the region’s biggest development challenges.”
“Response measures introduced by the government, including tax deferrals and waivers, liquidity provision to commercial banks, measures to ease access to credit and loan refinancing, logistics facilitation and food distribution measures, have contributed to cushioning some of the impacts from the crisis.”
“Today, the earlier fear of a dangerous lack of liquidity has been replaced in large part by concerns about the ability of the international financial architecture to support countries with increasing levels of debt and uncertain access to capital. One worrisome aspect seems clear: Many countries will require debt relief in the next few years if they are to maintain or restore access to financial flows. Higher interest rates in advanced economies, and the United States in particular, could compound the difficulties of emerging market countries in servicing existing debt and refinancing maturing debt.”
“This will be accomplished through continued restraint in hiring and wage awards (including in the four-year wage agreement that will come into effect in FY2021/22) and by improved wage-bill management.”
“Such an unprecedented global undertaking requires strong cooperation, including financial support. Yet the urgency should be clear to all. As long as COVID-19 persists at high rates of transmission anywhere in the world, the pandemic will continue to disrupt global production, trade, and travel, and will also give rise to viral mutations that threaten to undermine previously acquired immunity from past infections and vaccinations.”
“Kenya’s debt remains sustainable, although it is at high risk of debt distress, according to the IMF.”
“China is the world’s largest official creditor, but we lack basic facts about the terms and conditions of its lending. Very few contracts between Chinese lenders and their government borrowers have ever been published or studied. This paper is the first systematic analysis of the legal terms of China’s foreign lending.”
“An in-depth analysis of Cameroon, Ecuador, Egypt and Nigeria and found mixed results in meeting the IMF’s transparency commitments. There remained inconsistencies in the types of measures to which governments committed, their implementation, and the role of the IMF in ensuring compliance. The transparency commitments in the emergency loans spurred all four governments to produce information about their spending and contracts that they would have otherwise not published. However, the amount, accessibility, and quality of the disclosed information varied widely and was inadequate for meaningful oversight for any of the four countries.”
“Pioneering firms have the potential to achieve significant social and economic benefits in fragile and conflict‑affected settings. However, these contexts involve higher risks and costs, which dissuades pioneers and investors. We argue that the public good these firms provide warrants the use of public funds to offset the costs of pioneering in these settings.”
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