Western countries need to put together a debt relief and aid package to match that of the landmark Gleneagles summit deal in 2005 in order to counter a severe funding squeeze affecting struggling African countries, the International Monetary Fund has said.
Abebe Selassie, the director of the IMF’s African department, said without a scaling up of financial support some of the world’s poorest countries would have no chance of meeting the 2030 UN goals for poverty reduction.
“We need another Gleneagles moment,” he said in an interview with the Guardian before the release of the IMF report on the state of countries in sub-Saharan Africa.
At the Gleneagles summit 18 years ago, the G8 group on industrialised countries agreed to double aid to Africa and announced a comprehensive package of debt relief. Selassie said something similar was now required.
The IMF official said that even before the pandemic it looked like a “tall order” for low-income countries in Africa to meet the UN’s 2030 sustainable development goals. Now recent shocks – Covid 19, higher inflation and the war in Ukraine – had made the situation “very difficult”.
Selassie added that countries needed help not just to alleviate poverty but to meet the challenge of global heating. “The inexorable logic of climate change is beginning to affect the region,” he said. “Nobody expected the series of shocks seen in recent years.”
The IMF expects annual growth in sub-Saharan Africa to slow from 4.2% to 3.6% this year, as its countries suffer a “big funding squeeze” tied to the drying up of aid and being frozen out of global capital markets.
Selassie said: “The effect of the pandemic was to push countries into a clearly unsustainable financial position in some cases, such as Chad and Zambia.” Unless a way was found to counter the funding squeeze, countries that were experiencing cashflow problems would “clearly be facing more serious solvency challenges”, he added.
The sharp increase in global interest rates had raised borrowing costs for sub-Saharan African countries, on domestic and international markets.
after newsletter promotion
Moreover, higher US interest rates had pushed the effective exchange rate for the dollar to its highest level in two decades last year. This increased the burden of dollar-denominated debt service payments. Interest payments as a share of revenue had doubled for the average country in the region over the past decade.
The IMF said it had scaled up its financial help since the pandemic began three years ago. Between 2020 and 2022 the Washington-based organisation provided more than $50bn (£40bn) to the region, more than twice the amount disbursed in any 10-year period since the 1990s.
But Selassie said wealthy developed countries also needed to do more. “I refuse to believe the international community can’t do more. If it doesn’t it will be shortsightedness of the highest order.”
