DON'T MISS : Talking Africa Podcast – Mozambique's insurgency: After Palma, what comes next?

‘New Deal’, SDRs, debt and vaccines… What emerged from the summit on financing African economies

By Benjamin Roger
Posted on Wednesday, 19 May 2021 14:09

IMF chief Kristalina Georgieva, DRC president Felix Tshisekedi, French president Emmanuel Macron and Senegalese president Macky Sall at the summit on financing African economies in Paris May 18, 2021
IMF chief Kristalina Georgieva, DRC president Felix Tshisekedi, French president Emmanuel Macron and Senegalese president Macky Sall at the summit on financing African economies in Paris May 18, 2021. Ludovic Marin/Pool via REUTERS

The summit aimed to find ways to boost the African economy. Emmanuel Macron, who received 21 heads of state and government from the continent, said the discussions had enabled the "launch of a profound dynamic". But the final results fall short of a 'New Deal' for Africa, as no re-allocation of IMF special drawing rights was agreed.

At the opening of the summit on financing of African economies, which was held in Paris on 18 May, Macron hammered out two words: ‘urgency’ and ‘ambition’ for the continent. A few hours later, when the time came to take stock of the situation, in front of the Eiffel Tower, it was a mixed bag of issues.

21 African heads of state and government travelled for the summit, as well as several heads of continental organisations (African Union, ADB, etc.) and international organisations (European Union, IMF, etc.).

The aim was to come up with a unified response to the unprecedented economic shock presented by the Covid-19 pandemic and establish a vast recovery plan for the continent – sort of like an ‘African New Deal’, as the participants described it.

In search of the “New Deal”

“This moment can be an opportunity to finally respond to the immense challenges that we did not want to fully address in previous years,” Macron said at the final press conference.

“The objective of this summit was twofold: to provide short-term responses and to launch a dynamic that can truly create this economic and strategic New Deal with the African continent,” said Macron. “I believe that we have succeeded in making progress on these two aspects. Of course, we cannot change the life of the African continent or relations between Africa and the rest of the world in one day and in one summit, but I believe that our discussions have shown a collective awareness, a change of mindset and the launch of a profound dynamic.”

At a time when most rich countries have already adopted massive financing plans worth hundreds of billions of euros, many fear that African economies will stall – with all the social and migratory consequences which that entails – if nothing is done to help them overcome the current crisis.

We now need to convince the others to make the same effort, especially the United States. However, no precise amount or timetable for these SDR reallocations has been communicated,” Macron said.

Hit hard economically and socially by the Covid-19 pandemic, Africa went into recession in 2020 after a quarter century of continuous growth. According to the IMF, up to $285bn in additional financing, over the period 2021-2025, would be needed for African countries to strengthen their response to the pandemic.

A “drop in the bucket”

To meet this huge financial challenge, one strategy was at the heart of debates at the ephemeral Grand Palais on the Champ de Mars: the IMF’s Special Drawing Rights (SDRs), which provides foreign currency to countries that need it, without creating additional debt.

The principle of a global issue of $650bn in SDRs by the IMF – agreed before this summit, thanks to the endorsement of the United States, last March – was confirmed.

But of this $650bn, only $33bn is earmarked for African countries, which could be made available to them as early as September. Why such a small amount, a ‘drop in the bucket’ as Macky Sall put it? Because SDRs are distributed according to the quotas of each country within the IMF. The largest share goes to the richest countries.

“This is too little and still insufficient,” Macron said at the end of the summit, hence the stated desire to reach a target of $100bn in SDRs for Africa in the coming months.

How can this be achieved? Through the reallocation of SDRs to the countries of the continent by the richest countries. “France is ready to do so, as is Portugal,” the French president said. “We now need to convince the others to make the same effort, especially the United States. However, no precise amount or timetable for these SDR reallocations has been communicated.”

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options