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African Economic Outlook: from debt resolution to growth

The African Economic Outlook is the African Development Bank’s flagship annual publication. It provides economic data as well as analysis and recommendations for the continent’s economies. Each edition focuses on a contemporary theme.

The 2021 theme From debt resolution to growth: the road ahead for Africa highlights the impact of Covid-19 and government debt and offers mitigating measures to governments and policymakers. This latest African Economic Outlook estimates that Africa’s gross domestic product (GDP) contracted 2.1% in 2020, the continent’s first recession in half a century. The AfDB does however project GDP growth on the continent to grow by 3.4% in 2021.

Rgarding debt, the report estimates that African governments need additional gross financing of about $154 billion in 2020/21 to respond to the COVID-19 crises.

Africa economic outlook is that continent’s mounting debt is compounded by COVID-19

In a digital conversation preceding the launch of the report Nobel laureate Joseph Stiglitz and AfDB President Dr Akinwumi Adesina spoke about the continent’s rising debt levels.

Stiglitz called for a comprehensive global plan to help countries cope with mounting debt that has been compounded by the COVID-19 pandemic.

A recipient of the Nobel Memorial Prize in Economic Sciences in 2001, Stiglitz spoke about the prevailing global debt architecture in response to Adesina’s remarked that Africa’s debt has climbed to around 70% of gross domestic product (GDP).

“That’s a question I’ve been very concerned with for a long time… You need debt restructuring and that needs to be really high on the international agenda. Every country has bankruptcy laws, but there’s not bankruptcy law for international debt. Remember, when there’s too much debt it’s as much the creditors’ problem as the debtor’s problem,” said Stiglitz.

The two discussed recent debt relief efforts, including a debt standstill that the G20 group of wealthy nations presented to the world’s poorest countries in April 2020. Stiglitz said the standstill took place when it seemed the pandemic might last only a few months.

Stiglitz: “Now that it’s lasted a year, a standstill is not enough. What needs to be done with debt is comprehensive and quick restructuring.  We don’t want to fall into the trap of doing too little, too late.”

He proposes an international debt framework that has to include the private sector, given its growing role as a source of government debt.

This year’s report highlights how the economic fallout of the COVID-10 pandemic has contributed to rising debt levels among African countries and proposes remedies.

You can access the 2021 African Economic Outlook report online.

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