Al-Mashat Warns of COVID-19 Economic Repercussions in Africa, ME

Minister of International Cooperation and Governor of Egypt at the World Bank Group Dr. Rania Al-Mashat raised the alarm about the pandemic’s effect on economies in Africa, the Middle East and the increasing debt loads because of the economic downturn.

"Al-Mashat's remarks came during her participation in the G24 Ministerial Meeting, as part of the annual World Bank meetings," the International Cooperation Ministry said on Wednesday.

The virtual meeting included the participation of Governor of the Central Bank Tarek Amer, and Governor of Egypt at the International Monetary Fund, Director of the International Monetary Fund Kristalina Georgiev, and President of the World Bank Group David Malpass.

BLENDED FINANCING FOR SUSTAINABLE RECOVERY

Al-Mashat called for all efforts of international institutions to be streamlined and coordinated to support developing countries to build a sustainable economic recovery, as well as for an increase in blended financing to support the implementation of their national development plans.

Blended financing is a combination of public concessional official development assistance (ODA) with private or public resources to support the sustainable development goals, in terms of poverty alleviation, economic development, climate change, and gender equality.

Al-Mashat referred to Egypt's success in the execution of major national projects, particularly in the infrastructure sector, which was supported through innovative methods in financing such as blended finance, and helped Egypt achieve a positive growth rate at a time when all economies are shrinking.

According to the reports of the World Bank and the European Bank for Reconstruction and Development, Egypt is estimated to achieve growth of 3% and 2% during the current year, and about 2.1% and 5% next year, respectively.

Malpass mentioned the World Bank’s support for developing countries in their emergency response to the COVID-19 pandemic, adding that it deployed a $160 billion loan program for 100 countries to protect the vulnerable and bolster economic recovery.

MANAGING THE CRESTING DEBT WAVE

The pandemic has increased deficit-to-GDP ratios by 5.5 percentage points between 2019 to 2020, and public debt levels by 6.8 percentage points, meaning that emerging and developing countries need an estimated $2.5 trillion to meet their developing needs, according to the IMF.

To deal with the worsening debt vulnerabilities, the governors stressed the importance of debt transparency and assisting developing countries to build debt and fiscal management capacity, such as the extension of the Debt Service Suspension Initiative (DSSI) which will enable developing countries to manage the pandemic’s impact.

Key strategies to reduce debt distress include increasing the role of the IMF and the WBG to push for greater private sector participation, foster creditor coordination, and collective action as well as flexibility in lending policies to support countries undertaking debt restructuring.

During the meeting, governors of the International Monetary Fund and the World Bank referred to the need to adapt its traditional lending instruments to adequately meet the needs of member countries beyond the years of 2021 and to undertake governance reforms to enhance the role and voice of developing countries.

The Group of 24 (G-24) was established in 1971 to help coordinate the positions of developing countries on international monetary and development finance issues.