“Stepping Up With and For Africa”

IMF News, February 18, 2022

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Remarks by IMF Managing Director Kristalina Georgieva at the EU-AU Summit Roundtable on Financing for Sustainable and Inclusive Growth in Africa.
Date: February 18, 2022.
Key framing:
- Africa experienced a painful contraction in 2020 and has started growing again—but for many countries growth falls short of what is needed.
- In both 2021 and 2022, Africa’s projected growth trailed the global average.
- Stated objective: "Africa should outperform the rest of the world—so countries can create jobs and lift up living standards."

Reforms to concessional lending framework:
- Result: last year the IMF provided lending that was 13 times higher than the annual average of the previous decade.
- Recognition of Prime Minister Magdalena Andersson of Sweden for leadership as chair of the IMFC.
Special Drawing Rights (SDRs) allocation:
- African countries received US$33 billion out of a US$650 billion global allocation.
- In some countries, SDRs amounted to as much as 6 percent of their GDP.
- IMF is pursuing large scale on-lending of SDRs — from countries that got them but don’t need them as much, to countries that need them most.

Global target for reallocation to vulnerable countries: US$100 billion (target set by leaders last year).
- Progress reported: "more than halfway towards reaching this target."
- Current pledges: about US$60 billion in pledges from G20 members.
Two avenues to deploy on-lent SDRs:
- Poverty Reduction and Growth Trust (PRGT): IMF able to lend to countries in proportion to the quality of their reform programs; IMF will not ration support for African members.
- Creation of the Resilience and Sustainability Trust (RST) to support longer-term needs and structural transformation.

Purpose and innovations:
- For the first time, IMF will offer longer-term maturities and longer-term grace periods to support structural transformation of emerging market and developing economies.
- Objective: have the RST design approved at Spring Meetings in April and be in implementation by the Fall.
Features of the new Trust:
- Aim to keep interest rates very low—close to the interest rates for SDRs which today are still 0.05 percent (5 basis points).
- Offer policy support for longer-term structural transformation programs, with 10-year grace and 20-year repayment periods.
- Main objective: catalyze private sector investment in emerging market and developing economies by removing barriers to private sector participation and allowing the scale of financing that Africa needs.
Role in mobilizing private finance:
- Discussion with private sector on using contributions to reduce risk for private investment by borrowing from the RST.
- Strengthening the policy environment to enable investments and coordinated participation of development banks.

IMF assessment (May): needs of the African continent up until 2024:
- US$285 billion just to overcome the impact of COVID-19.
- "Twice as much again" to return Africa to a growth path where it can catch up or converge with the more advanced economies.
Complementary reforms IMF will support in countries:
- Domestic resource mobilization.
- Quality of spending, especially investments in human capital.
- Measures to increase private sector participation.

Collaboration aims:
- Work in partnership with regional development banks (RDBs) and multilateral development banks (MDBs), draw on their expertise, and seek ways to leverage resources together.
- Reference to President von der Leyen’s Global Gateways Initiative as aligned in objective to bring private sector financing at large scale.
Constraint on direct SDR channeling to regional development banks:
- IMF cannot allow members to channel SDRs directly to regional development banks because the IMF must protect the reserve quality of the asset "Special Drawing Rights" and ensure legal compliance with the Fund's regulations.
- Footnote clarification: "This statement is focused on national central banks in the EU which the ECB has indicated are not legally permitted to channel their SDRs through other institutions aside from the IMF. The IMF is working with MDBs and RDBs on SDR channeling options which might be used by other SDR holders."

Acknowledgments: thanks to President Sall and President Macron for origination of the thinking in November 2020.
Closing quote: "It is impossible until it is done".

Remarks by IMF Managing Director Kristalina Georgieva, February 18, 2022.