ADDIS ABABA, July 15 — For African economies that have yet to recover from the COVID-19 pandemic, the Ukraine crisis could not have come at a worse time, Vera Songwe, Under-Secretary-General of the UN and Executive Secretary of the UN Economic Commission for Africa (UNECA), has said.
“Commodity-price spikes and supply-chain disruptions are compounding inflationary pressures, causing currencies to depreciate and food and fuel costs to skyrocket,” a UNECA statement sent to Xinhua Thursday quoted Songwe as saying.
She noted that since the Ukraine crisis began, oil prices have reached their highest levels since 2008, wheat prices have soared to a 14-year high, and fertilizer prices have surged by nearly 30 percent.
“These macro trends have high human costs,” Songwe said, noting that as many as 25 African countries depend on wheat imports from Russia and Ukraine.
She noted that Rwanda and Tanzania import over 60 percent of their wheat from the two countries. That figure is nearly 70 percent in the Democratic Republic of the Congo (DRC) and exceeds 80 percent in Egypt. Russia alone supplies 45 percent of Namibia’s wheat, and 100 percent of Benin’s.
“With grain products often accounting for a large share of local diets, the risk of hunger and undernourishment is rising fast, and not just for low-income households. But many African governments have little scope to respond to this escalating crisis,” the UNECA chief said.
She noted that pandemic-related uncertainty led to massive capital flight from the continent, and countries’ debt burdens grew heavier. Over 40 billion U.S. dollars in debt repayments were due in 2021, and debt service is expected to exceed 7 percent of Africa’s GDP in 2022 even before the Ukraine crisis and the U.S. Federal Reserve’s interest-rate hikes.
“As the crisis has intensified, access to international capital markets has tightened,” Songwe said.
Songwe said Africa’s current plight reflects a fundamental international failure. The continent’s integration into the global economy over the last several decades has not been accompanied by changes to the global financial system aimed at ensuring that its needs, both for growth and support in times of global crisis, are met.
She said such changes include accelerating the effort to reform the G20’s Common Framework for Debt Treatments and expanding it beyond the Debt Service Suspension Initiative. It also means improving African countries’ market access.
While over 23 African economies have accessed the Eurobond market over the last four years and emerging African economies do so regularly, they remain weighed down by low credit ratings, wide interest-rate spreads, and negative investment-risk perceptions, according to figures from the UNECA.
Songwe said as this may take some time to correct, markets have tools with which to address the illiquidity of Africa’s bonds, thereby reducing costs for African borrowers and crowding in more financing.
She emphasized that tapping into Africa’s vast economic potential will be possible only if major developed countries and emerging economies work together to design a more inclusive and effective global financial system that meets the continent’s liquidity and debt-sustainability needs. (Xinhua)