Africa needs $7.1 trillion “New Deal” to recover from pandemic – ECA

With many African countries grappling with the shackles of debt servicing in the midst of a downward economic trend caused by COVID-19, a 7.1 trillion dollar “New Deal” has been proposed as the only solution.

Mr Antonio Pedro, Deputy Executive Secretary of the Economic Commission for Africa (ECA), stated this at the ongoing African Economic Conference (AEC) to chart a new path for Africa’s post-COVID-19 economic recovery.

He compared the proposed New Deal to a similar deal struck by the United States between 1933 and 1939, during Franklin D. Roosevelt’s presidency.

He noted that the American deal was worth 41.7 billion dollars at the time, which he said has since increased to 653 billion dollars.

According to Pedro, the new Africa deal would be part of the external funds required by Africa to address, among other things, the rising risk of African debt defaults as a result of the COVID-19 pandemic.

“On the external front, Africa requires a new deal to recover from the pandemic’s ravages.” At the time of its implementation, Roosevelt’s New Deal cost $41.7 billion.

“Given Africa’s current population of 1.37 billion, a New Deal would have to provide $7.1 trillion in financing to equal the New Deal in the United States on a per capita basis.”

“The resources required to finance a New Deal are enormous and cannot be funded solely with public funds.” The contribution of private funds will be critical.

“However, we are all aware of the high cost of private financing.” At the same time, private direct capital investments are driven more by economic returns than by social welfare concerns.

“By combining public and private resources, more private investments and financing can be directed to social and other orphaned sectors through risk-sharing and risk mitigation,” he said.

He stated that the ECA and CoP26 had collaborated to launch the Liquidity and Sustainability Facility (LSF) with the goal of lowering the cost of portfolio investments in emerging markets and attracting a new class of investors to the continent.

He stated that the LSF intends to leverage private financing by allowing holders of African sovereign bonds to access short-term financing using such instruments as collateral.