BIZweek n°287 24 avr 2020
BIZweek n°287 24 avr 2020
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  • Parution : n°287 de 24 avr 2020

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  • Editeur : Capital Publications Ltd

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  • Nombre de pages : 9

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VENDREDI 24 AVRIL 2020 BIZWEEK ÉDITION 287 KRISTALINA GEORGIEVA Managing Director, International Monetary Fund (IMF) A Global Crisis Like No Other Needs a Global Response Like No Other I have been saying for a while that this is a ‘crisis like no other.’It is: More complex, with interlinked shocks to our health and our economies that have brought our way of life to an-almost complete stop ; More uncertain, as we are learning only gradually how to treat the novel virus, make containment most effective, and restart our economies ; and Truly global. Pandemics don’t respect borders, neither do the economic shocks they cause. The outlook is dire. We expect global economic activity to decline on a scale we have not seen since the Great Depression. This year 170 countries will see income per capita go down – only months ago we were projecting 160 economies to register positive per capita income growth. Actions taken Exceptional times call for exceptional action. In many ways, there has been a ‘response like no other’from the IMF’s membership. Governments all over the world have taken unprecedented action to fight the pandemic— to save lives, to protect their societies and economies. Fiscal measures so far have amounted to about $8 trillion and central banks have undertaken massive (in some cases, unlimited) liquidity injections. For our part, the IMF has $1 trillion lending capacity – 4 times more than at the outset of the Global Financial Crisis—at the service of its 189 member countries. Recognizing the characteristics of this crisis—global and fast-moving such that early action is far more valuable and impactful—we have sought to maximize our capacity to provide financial resources quickly, especially for low-income members. In this regard, we have strengthened our arsenal and taken exceptional measures in just these two months. These actions include: Doubling the IMF’s emergency, POST SCRIPTUM rapid-disbursing capacity to meet expected demand of about $100 billion. 103 countries have approached us for emergency financing, and our Executive Board will have considered about half of these requests by the end of the month. Reforming our Catastrophe Containment and Relief Trust, to help 29 of our poorest and most vulnerable members—of which 23 are in Africa—through rapid debt service relief, and we are working with donors to increase our debt relief resources by $1.4 billion. Thanks to the generosity of the UK, Japan, Germany, the Netherlands, Singapore, and China, we are able to provide immediate relief to our poorest members. Aiming to triple our concessional funding via our Poverty Reduction and Growth Trust for the most vulnerable countries. We are seeking $17 billion in new loan resources and, in this respect, I am heartened by pledges from Japan, France, UK, Canada, and Australia promising commitments totaling $11.7 billion, taking us to about 70 percent of the resources needed towards this goal. Supporting a suspension of official bilateral debt repayments for the poorest countries through end 2020—a ground-breaking accord among G20 countries. This is worth about $12 billion to nations most in need. And calling for private sector creditors to participate on comparable terms—which could add a further $8 billion of relief. Establishing a new short-termliquidity line that can help countries strengthen economic stability and confidence. This is the package of actions that the International Monetary and Financial Committee endorsed last week at our virtual Spring Meetings. It represents a powerful policy response. Above all, it enables the IMF to get immediate, ‘here and now’support to countries and people in desperate need. Today. Preventing a protracted recession But there is much more to be done and now is the time to look ahead. To quote a great Canadian, Wayne Gretzky : «Skate to where the puck is going, not where it has been.» We need to think hard about where this crisis is headed and how we can be ready to help our member countries, being mindful of both risks and opportunities. Just as we responded strongly in the initial phase of the crisis to avoid lasting scars for the global economy, we will be relentlessin our efforts to avoid a painful, protracted recession. I am particularly concerned about emerging markets and developing countries. They have experienced the sharpest portfolio flow reversal on record, of about $100 billion. Those dependent on commodities have been further shocked by plummeting export prices. Tourism-dependent countries are experiencing a collapse of revenues, as are those relying on remittances for income support. For emerging economies, the IMF can engage through our regular lending instruments, including those of a precautionary nature. This may require considerable resources if further market pressures arise. To prevent them from spreading, we stand ready to deploy our full lending capacity and to mobilize all layers of the global financial safety net, including whether the use of SDRs could be more helpful. For our poorest members, we need much more concessional financing. With the peak of the outbreak stillahead, many economies will require significant fiscal outlays to tackle the health crisis and minimize bankruptcies and job losses, while facing mounting external financing needs. But more lending may not always be the best solution for every country. The crisis is adding to high debt burdens and many could find themselves on an unsustainable path. We therefore need to contemplate new approaches, working closely with other international institutions, as wellas the private sector, to help countries steer through this crisis and emerge more resilient. And the IMF, like our member countries, may need to venture even further outside our comfort zone to consider whether exceptional measures might be needed in this exceptional crisis. Preparing for recovery To help lay the foundations for a strong recovery, our policy advice will need to adapt to evolving realities. We need to have a better understanding of the specific challenges, risks and tradeoffs facing every country as they gradually restart their economies. Key questions include how long to maintain the extraordinary stimulus and unconventional policy measures, and how to unwind them ; dealing with high unemployment and ‘lowerfor-longer’interest rates ; preserving financial stability ; and, where needed, facilitating sectoral adjustment and private sector debt workouts. We also must not forget about long-standing challenges that require a collective response, such as reigniting trade as an engine for growth ; sharing the benefits of fintech and digital transformation which have demonstrated their usefulness during this crisis ; and combating climate change—where stimulus to reinforce the recovery could also be guided to advance a green and climate resilient economy. Finally, in the new post-COVID-19 world, we simply cannot take social cohesion for granted. So we must support countries’efforts in calibrating their social policies to reduce inequality, protect vulnerable people, and promote access to opportunities for all. This is a moment that tests our humanity. It must be met with solidarity. There is much uncertainty about the shape of our future. But we can also embrace this crisis as an opportunity—to craft a different and better future together. 6
VENDREDI 24 AVRIL 2020 BIZWEEK ÉDITION 287 - Dr. Martin Fregene is the Bank’s Director of Agriculture and Agro-industry - Atsuko Toda is Director of Agricultural Finance and Rural Development at African Development Bank OPINION PIECE Mitigating COVID-19’s impact on Africa’s food systems We are facing great uncertainty on the African continent. The global spread of COVID-19 and the rising number of coronavirus cases in Africa are fuelling anxiety about negative economic growth, failing healthcare and collapsing food systems. We are already grappling with a locust outbreak in the Horn of Africa, drought and flood extremes due to climate change and increasing food importation costs of more than $47 billion in 2019. The convergence of all these sets the stage for an imminent food crisis - unless measures are taken to mitigate the impact of the pandemic. Consider also that the U.S. dollar has surged against emerging market currencies, reducing the purchasing power of countries reliant on commodity imports and sparking higher consumer prices. Inflationary pressure on food staples can breed social tension and even unrest. Anti-pandemic measures like nationwide lockdowns and border closures compound food shortages – especially of nutritious but perishable foods like fruit and vegetables. Restrictions on movement and quarantine measures impede farmers’access to markets. In Nigeria, rice prices are 30% higher than in January, thanks to panic buying, transport restrictions and rising global prices. Also, foreign direct investment and aid into Africa is expected to fall, or be delayed as international investors and development partners redirect capital to their local economies and into stimulus packages to combat COV- POST SCRIPTUM The global spread of COVID-19 and the rising number of coronavirus cases in Africa are fuelling anxiety about negative economic growth, failing healthcare and collapsing food systems ID-19. But Africa is comingup with its own solutions for these challenges, with the African Development Bank being prominently involved. To address the threat of food security, several short-termmeasures are being taken: Creation of a «green channel» for the free flow of food and agricultural inputs. Creation of strong demand for agricultural inputs of fertilizer, seeds and agro-chemicals through smart input famer subsidies. Measures to prevent food price hikes by releasing food from government grain reserves and implementing anti-hoarding policy. Rapid scaleup of food production technologies, including high-yielding, early-maturing, drought-tolerant, diseaseand pest-resistant staple crops, livestock and fish through programs like the Bank’s Technologies for African Agricultural Transformation initiative. (taat-africa. org) Feeding programs for the worst affected and most vulnerable zones. Medium to longer-termfood security interventions include: Provision of recovery strategy support to key supply chain players like logistics companies and anchor farmers. Strengthening food supply chain resilience via efficient production, processing and value addition. Enforcing food safety, improved food quality and traceability policies in the post-coronavirus period. Promoting digitalization and e-commerce in markets hit by COVID-19. Guided by lessons learned from previous health crises, including the Ebola epidemic, the Bank has responded to the pandemic by putting together a package of support for the public and private sector. The COVID-19 Response Facility will mobilizeup to $10 billion to provide financial assistance to African countries fight the pandemic. The Bank has also raised a $3 billon COVID-19 bond, proceeds of which will go to address fiscal challenges, as wellas emergency procurement of drugs, vaccinations, ventilators and other health-related expenditures, as wellas feeding programs, agro-input subsidies and other socio-economic interventions. To rebound from the pandemic, Africa must maintain adequate food reserves, avoid protectionist policies and promote value chains that link domestic and international markets. As the Bank takes a key role in supporting African countries to design and implement coordinated policy responses, it will work with regional partners including the African Union and the United Nations Economic Commission for Africa, as wellas international ones such as the World Trade Organization, the Global Alliance for Improved Nutrition, the Food and Agriculture Organization, the World Bank, and other international partners. 7 17 April 2020 Cont’d on page 8

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