Good morning to all of you. I’m pleased to be with so many of you from across West and Central Africa, and with our Vice President for the region, Ousmane Diagana, who some of you have interacted with before.
As you know, the COVID-19 pandemic has taken a toll on African lives, economies, and livelihoods. It’s had a devastating impact on the poor, in job losses, a reversal of education gains, and rising debt levels.
Over the last ten years, the WBG has invested over $200 billion in Sub-Saharan Africa, and, as I announced on Tuesday, at the Summit of Financing African Economies in France, in just the next five years, we intend to invest and mobilize about $150 billion in Africa to support the continent’s recovery from the pandemic and its long-term development. A large portion of this will be through grants and long-term, zero interest-rate loans from IDA, which continues to provide strong positive net flows to Africa. An ambitious and successful IDA20 replenishment by December 2021 will be critical to provide the concessional financing and grants that the IDA countries in Africa urgently need.
As part of our immediate response to the crisis, the World Bank Group has been assisting countries with the purchase and deployment of vaccines. IFC has supported the private sector in the region to create jobs across critical sectors such as manufacturing and agribusiness; and is helping pharmaceutical companies to expand their local vaccine manufacturing capacity and supporting innovative business models to expand availability of testing and treatment.
Since the outbreak of COVID-19, the Bank has made available more than $24 billion to African countries to support their health and economic recovery. Our Board has authorized up to $12 billion worldwide to support countries in their vaccination efforts. As of today, 38 African countries (18 for West and Central Africa) have requested the World Bank’s support for vaccine financing projects. Six projects in Africa have already been approved, including Cabo Verde, Cote d’Ivoire, and The Gambia, and many more are scheduled to be approved in the coming month.
Unfortunately, the supply of vaccines in the region is an even more binding constraint than resources. Many countries now have dollars available to spend on vaccine doses, but rapid deliveries aren’t available.
Delays in starting vaccination rollouts in developing countries are deepening global inequality and leaving hundreds of millions of elderly and vulnerable at risk. I’ve repeatedly urged countries that expect to have excess vaccine supplies to release their excess as soon as possible to developing countries that have delivery programs in place.
I have also emphasized the need for greater transparency in contracts between governments, pharmaceutical companies, and organizations that are involved in vaccine production and delivery so that financing can be directed effectively, and countries can plan for receipt and deployment.
In that spirit, the World Bank yesterday launched a comprehensive online portal that provides easy access to information about our projects, including individual country-financing operations. The portal also incorporates what has been learned from the vaccine readiness assessments we helped undertake with over 140 countries over the last six months. I encourage all of you to review the portal and provide feedback.
Debt sustainability and transparency will also be vital in attracting new financing and investment. In West and Central Africa, public debt has almost tripled over the past decade from US$109 billion in 2010 to US$306 billion 2019, rising from 34.1 to 56.4 percent of GDP. The number of countries assessed at high risk of external debt distress or in debt distress has also tripled from three in 2010 to nine in 2019.
As the COVID-19 effects persist in 2021, the debt situation will certainly deteriorate further. Comprehensive debt solutions will involve at least four elements—debt suspension, debt reduction, debt resolution, and debt transparency.
We supported the G20’s Debt Service Suspension Initiative—or DSSI—which has provided fiscal space to countries to cope with the impact of the pandemic. Sixteen countries from West and Central Africa have requested to participate in the DSSI as of April 2021. However, participation by major creditors has been only partial and continues to allow large profits to be withdrawn from Africa even during the crisis, with no prospect of debt cancellations.
A permanent solution is necessary to reduce the stock of debt in the poorest countries. The World Bank and IMF are closely coordinating to support the G20 in implementing the G20’s Common Framework for debt reduction.
The success of Common Framework hinges on a full participation by the private sector and improvements in debt transparency – two critical areas where recent progress has been limited as demonstrated by the DSSI process. A large number of contracts contain provisions that make meaningful debt relief difficult, including collateralization, non-disclosure clauses, and rejections of comparable treatment.
Data disclosure and reconciliation will be critical elements to facilitate the debt treatment discussions and build trust among parties involved in the debt restructuring process.
Full private sector participation is an essential part of any path to lasting debt sustainability. It will not be sufficient that Chad or Ethiopia merely “seek” comparable treatment from private creditors. Under the Common Framework, private creditors are expected to do their “fair share” and deliver debt relief in a timely manner, and on fully comparable terms to official bilateral creditors.
A debt workout in which official bilateral creditors provide the lion’s share of the needed debt relief by a government in distress is a subsidy of private sector investors by donor nations. That is not the regime envisioned by the Common Framework.
Private creditors need to recognize that a successful debt restructuring is a beneficial outcome for all parties involved – it brings relief to the people of Chad, but also benefits the private sector, as it limits their losses compared to a scenario of outright default. In the longer term, stable and thriving economies can provide business opportunities for investors.
Without private creditors fully onboard, the Common Framework will not deliver a sustainable solution for Chad, Ethiopia, or Zambia. This may in turn discourage other countries from solving their debt problems early on, leading to lost years of economic development, increased poverty, and lower living standards.
The World Bank Group is doing its part. IDA expects to remain the largest provider of positive net flows in Chad over the next decade of around US$1.4 billion, strengthening Chad’s ability to sustain a moderate debt burden if that can be achieved. This new World Bank financing would build on an already strong country program. Over the past 5 years, IDA has committed over US$1.0 billion in Chad, all on grant terms, which has translated into positive net flows of over US$500 million, addressing some of Chad’s critical development challenges such as energy, health, and social protection. IDA disbursements have risen from US$21 million in FY15 to US$181 million in FY20, a more than eightfold increase. We are equally committed to support other countries as they go through the Common Framework process toward fiscal sustainability.
Moving on from debt, as countries work to recover, tackling climate change will be key for the region: By 2030, 26 million additional people are at risk of being pushed below the poverty line in West and Central Africa due to climate change. Droughts, floods, and coastal erosion are having a devastating impact on populations and the economies.
We are working with countries to strengthen their capacity to absorb, adapt, and transform systems in response to climate change. We have included measurable indicators of climate resilience in our programs, and we will increase the shared benefits of our climate finance to 35% by 2024. Achieving adaptation and climate resilience will be pivotal for Western and Central Africa to meet fundamental food, water, and environmental security and to counter climate shocks.
We are also working to address fragility, conflict, and violence (FCV): 11 of the 22 countries in the region are now affected by fragility, conflict, and violence, and more than 70% of the region’s population now live in FCV-affected countries. That is why, for example, we have scaled up our financial support to the G5 Sahel countries – Burkina Faso, Chad, Mali, Mauritania, and Niger, through IDA to support conflict prevention, resilience, and emergency responses, reaching $8.5 billion for fiscal years 21-23.
Let me conclude by saying that while we know that the road to recovery will be long, countries in the region have applied lessons from previous crisis such as the West Africa Ebola outbreak in 2014. Many countries have strengthened their social safety nets to help protect the poor that have been most affected by the crisis, and to move faster on key reforms and investments that will be crucial for long-term development.