President Nana Addo Dankwa Akufo-Addo has called on the Bretton Woods institutions to reset the global financial system rules to give African countries an equal opportunity to develop, in the wake of the COVID-19 pandemic.

He said just as the institutions helped to rebuild the post-war global economy and rekindled international economic cooperation 77 years ago, there was now a historic opportunity to restructure the global financial architecture to also respond better to the needs of Africa.

The President, who made the call at the Summit on Financing African Economies in Paris, France, yesterday, said the Bretton Woods Conference, which took place as World War II drew to a close, created a global financial architecture which, over the last 77 years, had proved to be unfavourable to Africa.

President Akufo-Addo said “inequity in the global economic system, as well as leadership and governance issues, have not been favourable to the continent.”

“These challenges have resulted in a global economic system that has proved to be incapable of supporting lives and livelihoods, including allocating sufficient long-term resources to support Africa's economic transformation,” he added.

Structural inequalities

President Akufo-Addo further said the cost of Africa's development did not reflect its economic fundamentals, credit,or default cost, citing the case of Ghana where the sovereign debt is more expensive than that of similarly rated Belarus, which pays some 100 basis points less than Ghana.

The structural inequities confronting African economies, he said, had been worsened by the COVID-19, evidenced by the fact that a mere two per cent of the 1.3 billion vaccine doses administered globally at the end of April were in Africa.

“The pandemic has also ensured that the total fiscal deficit of Africa rose from 4.7 per cent of GDP in 2019 to 8.7 per cent in 2020; overall debt levels are also estimated to have increased from 57 per cent of GDP in 2019 to 70 per cent per cent in 2021.

“Without the fiscal room to breathe, Africa could truly become the forgotten continent, and that is why there is the urgent need for comprehensive debt relief and debt cancellation,” he added.

Solutions

The President proposed two solutions at the conference to help address the situation confronting Africa.

Beyond some two pillars announced by President Emmanuel Macron of France, President Akufo-Addo suggested a third pillar, which he said should focus on the restructuring of the current global financial architecture to provide for access and equity to long-term finance to support the economic transformation of Africa.

“This should include the establishment of an African Stability Mechanism, akin to the European Stability Mechanism. The African Stability Mechanism will be a permanent firewall for Africa to safeguard and provide instant emergency access to financial assistance for countries in financial difficulty,” he said.

The second solution proposed by the President was the bridging of the immediate liquidity and potential insolvency issues confronting Africa and its financial institutions.

“I urge the IMF to on-lend 25 to 30 per cent of new $650 billion SDRs to support low and vulnerable middle-income countries before the 2021 annual meetings, increase IDA funding to strengthen the balance sheet of the World Bank, replenish the African Development Bank and the Afreximbank to support investment in green investments, facilitate trade and support the private sector to create jobs and build back better,” he added.

With Africa becoming home to a quarter of the world's population in 2050, more than half of the global youth population and, potentially, having a GDP of some $29 billion, President Akufo-Addo told the gathering that “it is, thus, in our collective interest to create the conditions that will enable such a development to be of benefit to the entire globe”.