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Debt relief and economic recovery on the agenda at Paris summit

Leaders from across Africa as well as the heads of Bretton Woods institutions held a summit in Paris in an effort to find a solution to the debt crisis and economic difficulties that have come as a result of the COVID-19 pandemic. At the top of the agenda was what to do with the billions of dollars in debt that governments across the continent are struggling to manage.

The summit is part of French President Emmanuel Macron’s efforts to recast France’s engagement in Africa, where it was once a colonial power, at a time when the continent faces a near 300 billion dollar deficit by the end of 2023 while trying to recover from the downturn.

“We’re gathered here to reverse what has developed as a very dangerous divergence between advanced economies and developing countries, especially (in) Africa,” International Monetary Fund (IMF) chief Kristalina Georgieva said in opening remarks.

The summit brings together some 30 African and European heads of state, as well as the heads of global financial institutions like the IMF and World Bank.

Georgieva said the African continent’s economic output would increase by only 3.2% in 2021 compared with 6% in the rest of the world.

The African Development Bank forecasts that up to 39 million people could fall into poverty this year with many African countries at risk of debt distress because of the pandemic.

Macron has said he believes Africa needs a “New Deal” to give the continent a breath of fresh air.

World finance chiefs agreed in April to boost reserves (SDR)at the IMF by $650 billion and extend a debt-servicing freeze to help developing countries deal with the pandemic, although only $34 billion will be allocated to Africa.

Talks in Paris will centre on how to reallocate the SDRs that are earmarked for developed countries. Macron said wealthy countries should re-direct their SDRs so that the allocation to Africa increased to $100 billion.

“This is a big opportunity … to see how we can raise funds to save Africa, which has been hit very hard by this pandemic,” said Democratic Republic of Congo President Felix Tshisekedi, who is also chairman of the African Union.

Also due for discussion are the replenishment of the World Bank’s International Development Association, which provides emergency aid, private sector investment, and the broader question of how to treat the debt crisis.