African and European officials and heads of multilateral lenders and agencies gathered in Paris on Tuesday to discuss possible ways to fund Africa’s growth needs. The French President Emmanuel Macron organized the “Summit on Financing African Economies.”
According to the International Monetary Fund, Africa is likely to confront a funding deficit of 290 billion dollars by 2023. Despite the continent’s first contraction in half a century (-2.1 percent) last year, inflation is forecast to recover by 3.4 percent in 2021 and 4 percent in 2022.
A halt in public debt servicing, implemented in April 2020 at the initiative of the Paris Club and the G20 in response to the stress caused by the pandemic, has also provided some breathing space for developing countries, suspending approximately 5.7 billion euros in interest payments.
In 2020 and 2021, China, Africa’s largest bilateral creditor, has given at least $10.7 billion in worldwide debt relief.
But that won’t be enough. “We cannot use yesterday’s recipes,” when “we are collectively abandoning Africa to solutions that date back to the 1960s,” said Emmanuel Macron at the end of April, calling for a “New Deal for financing Africa.”
Macron cautioned against a “boomerang effect” of “reduced economic opportunities,” “forced migration,” and “expansion of terrorism.”
Leaders also urged the IMF to grant Special Drawing Rights (SDRs) to African countries to provide them with the liquidity needed to import essential goods and hospital equipment.
While the idea of releasing $650 billion in SDRs, $34 billion of which would be distributed to Africa, has been approved, the sum is deemed inadequate by the French presidency, which has proposed selling IMF gold to offer zero-interest loans to African countries.
On Monday, Ivory Coast President Alassane Ouattara urged the IMF to encourage African countries to run more significant budget deficits. He asserted that with more space, they could “better face the pandemic” and “finance urgent expenses to fight terrorism,” referencing his own country as an example, which borders Burkina Faso and Mali and experiences terrorist attacks.
However, there is a need for private investment to finance the development of a continent that aspires to be self-sufficient.