African Heads of State, ministers, leaders of the private sector, development actors and academics will gather in Cabo Verde from December 2 to 4, 2021 for the African Economic Conference. Developing new ways of financing the post-COVID-19 recovery and accelerating development in Africa will be the focus of many conversations in this year’s flagship economic event.
For three days, African leaders, projects leaders and thinkers will discuss innovative and sustainable options to finance Africa’s post-COVID development. They will reimagine development financing, discuss the reform of Africa’s financial systems to meet development challenges and whether Africa is on the verge of a new debt crisis.
Papers from prominent researchers were selected through an open competition and will provide innovative ideas to mobilise domestic public and private resources in the age of the digital revolution, enhance Africa’s position in the international financial system, review the role of public development banks, explore sustainable finance solutions, regional integration and the role of the global financial safety net; policy options for managing capital flow volatility; financial regulatory reforms and the role of climate risks.
The COVID-19 crisis is said to have exacerbated the pressure on Africa’s development financing challenges by making public finances more strained, debt unsustainable, and foreign direct investment retracting. Across Africa, the COVID-19 crisis has left more than 30 million people in extreme poverty, living on less than $1.90 a day.
To combat the effects of populations plunging into extreme poverty, governments on the continent have announced fiscal stimulus packages ranging in cost from about 0.02 per cent of GDP to about 10.4 per cent of GDP. While these are lifesaving interventions, African governments need significant additional gross financing to respond to these needs in 2022. These gross financing needs exceed the critical threshold of 15 per cent GDP for most countries.
Access to international capital markets, a growing debt financing source for many African countries, has declined as investors’ perception of risks increases. Capital flight from Africa, estimated at over $90 billion since January 2020, and investor risk aversion have caused volatile market movements.
Tightening global financing conditions make it more expensive for governments to get the financing they need to recover from the pandemic and refinance maturing debt. Domestic sources of financing such as tax and non-tax revenues, which were already modest, are expected to contract as GDP drops, and exports and imports decline. The supply and demand shock caused by the COVID–19 pandemic directly impacted the revenues of many African governments through reduced exports earnings and lower domestic tax revenues.