Stress, depression mirror police, private security force
Dr Rabah Arezki
As recovery from the economic fallout of Covid-19 pandemic occurs, richer countries appear to be progressing faster than poorer ones — many of them in Africa, where 60 per cent of the world’s poor live.
Asia, notably China, is leading the global recovery, followed by the US and other advanced economies.
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Behind the brighter outlook for these economies is disproportionate access to vaccines and the use of massive amounts of fiscal and monetary stimulus, totaling trillions of dollars.
Concerns have even started to shift from recession to the risk of overheating and inflation in certain economies because of the oversized nature of the stimulus measures — especially the US, which recently adopted a $1.9 trillion (Sh205 trillion) package to fight the effects of Covid-19.
By contrast, most of the developing world, especially Africa, is consumed by uncertainty about the economic recovery.
Because of its large population — 1.2 billion people — developments in Africa will weigh heavily on the world.
The recovery in Africa will depend on three factors — vaccines, debt and commodities.
Access to vaccines will help determine when the continent can truly reopen for business — including the important tourism sector, which has been devastated.
Recovery in the travel and tourism sector will be slow. Thus the international community must limit the hoarding of vaccines by richer countries.
At the current pace, Africa will not soon reach herd immunity — the point at which enough people are immune that the virus struggles to spread.
The delay could allow new strains of teh virus to emerge, which might lead to an economic and humanitarian catastrophe.
African countries also must do their share to ensure maximum transparency and fairness in distribution of the vaccine.
Debt distress is another hurdle Africa must clear to ensure recovery. Several countries defaulted on sovereign obligations in 2020 and these defaults are likely to accelerate in 2021 because fiscal and monetary buffers are exhausted.
Preventing unsustainable debt loads that preclude borrowing and ensuring orderly debt resolution are top priorities.
Regional development banks can play an important role in coordinating and supporting individual countries trying to deal with debt burdens and reignite growth.
But again, developing countries must do their share. Rebuilding strong governance systems, perhaps through fiscal rules and fiscal councils — at national and regional levels — to promote both discipline and solidarity will be crucial.
Stronger governance would help reignite growth and align debtors’ and creditors’ incentives.
Only economic growth can provide systematic and orderly resolution of debt.
Not everything is grim, however. Commodity prices are on the rise. A new commodity super cycle seems to be in the making.
An appropriate governance framework to manage proceeds from commodities in good and bad times is important to fostering the local private sector and creating much-needed jobs.
Good governance is also important to rebalancing African growth drivers from external to internal ones, especially in the face of the new and growing risk of stranded assets.
All in all, bold actions on governance by African countries will help reignite growth over the medium run.
But to avoid a catastrophe in the short run, urgent action is needed by the international community on widening access to vaccines and debt relief. - The writer is chief economist and vice president for economic governance and knowledge management at the African Development Bank
