HOW SPECIAL DRAWING RIGHTS AND AID ARE SUSTIANABLE OPTION FOR SAVING AFRICA FROM THE EFFECTS OF COVID-19

“This offers Africa hope, bright future and high chances to navigate current economic shocks”.
By Nicholas Kazovamunhu
The African region has not been from the economic shocks caused by the unexpected heat of the corona virus.
To take note is that economic growth, budget assumptions had to be abandoned and government attention had to be directed to finding funds to see countries through the crisis and avert a humanitarian catastrophe.
Various mechanism were initiated by different governments which included lockdowns, borders closures and international travel came to a standstill and this derailed one Africa’s integration project the African Continental Free Trade Area, (AfCFTA).
These varying mechanism has tremendous effects especially in key areas such as trade, capital flow, employment and increased poverty.
Projections done by International Futures (IFs, 2020) modelling platforms shows that Africa accounts for nearly 60% of Africans are living in poverty.
In a bid to help the African continent the European states under the G-7 met on the March 19th agreed to support a sizable increase in the International Monetary Fund (IMF), Special Drawing Rights.
In April this year world finance chiefs agreed to boost the IMF-SDR reserves by 650 Billion as well as extending a debt-servicing freeze to help the African continent cope up with the pandemic.
Basically the SDR are a freely usable currencies and it is a basket of five currencies which include the British Pound, US Dollar, Euro, Chinese Renmubi and Japanese Yen.
The move by the G7 to increase their quota size of SDR would offer sustainable help to Africa states and catapult them from the current economic shocks.
Increasing SDR would be a fundamental move to save Africa from its current financial disaster and thereby limit economic and financial fall out of the Covid-19 pandemic.
The Special Drawing Rights will automatically enhance international financial liquidity in the hands of developing states, so that public responses to the health crisis are not jeopardized by financial crisis.
In addition, of critical importance is the impact of covid-19 pandemic on growth, the continent’s rapidly rising debt levels and its ability to service the growing debt burden.
In May this year several African leaders and various International Financial Institutions (IFI) met to discuss and deliberate on ways to finance African economies affected by covid-19 and also on how they can deal with the continent’s billions of dollars in debt.
This might be an opportunity for African economies to resuscitate as alluded by the President of France Emmanuel Macron when he said that he believes Africa needs a “New Deal” to give the continent a breath of fresh air.
Further the President of France stated that they would cancel around 5 Billion debt owed by Khartoum.
This offers Africa hope, bright future and high chances to navigate current economic shocks.
Debt cancellation will provide the African economies with an opportunity to achieve sustainable and inclusive socio-economic development and enhancing competitiveness.
Also aid will present Africa with a chance to increase competition, innovation and prosperity for Africans in the long run although this will require alignment to provide structure and clarity on how goods will move.
In the Covid-19 pandemic, Africa is estimated to have made losses amounting to $79 billion causing major disruptions to trade and in this case trade liberalisation through coupled by foreign aid and debt cancellation can present an opportunity for an uninterrupted flow of capital and labour fostering recovery and growth.
Aid has been a key development factor for African states and presenting states with an opportunity to boost again and stabilize their economies.
In April 2020, the International Monetary Fund (IMF) approved US $500 million to cancel the debt payments of 27 of the world’s poorest countries for six months and more than 20 of these countries were African.
Therefore it can be reasonably asserted that aid and increase of quota allocation by the G(7) states will enhance development on Africa and present an opportunity for the African countries to thrive and most importantly overcome the economic shocks in the form of financial fallout presented by the novel corona virus.
Thus aid and debt cancellation would be provide the whole African region with a room to develop since, debt has been cancerous diseases affecting economic growth and also driving away Foreign Direct Investment (FDI) since investors are reluctant to invest such unstable economies such as Zimbabwe, hence aid coupled with increase in SDR is a very welcome initiative to boost African states from the wounds of coronavirus.
Nicholas Kuzovamunhu, MSc in International Trade and Diplomacy  (UZ)
(+263782 739 826\ +263717 600 677) Nicholaskay17@gmail.com.


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