For Africa to build resilience and boost economic growth amidst the ongoing triple planetary crisis, there is an urgent need for individual countries to get highly concessional financing facilities in place to address the huge financing need that countries have which has pushed them into debt experts have warned.
During a recent one day virtual workshop on Catalysing Access to the IMF Resilience and Sustainability Trust (RST), organized by AfriCatalyst and the Economic Commission for Africa (ECA), participants discussed the opportunities and challenges African countries are facing when it comes to accessing International Monetary Fund’s Resilience and Sustainability Trust (RST).
In 2022, the IMF board approved the establishment of the Resilience and Sustainability Trust (RST) to provide financial support to countries addressing two key long-term structural challenges, climate change and pandemic preparedness. As of March 2023, IMF Board has approved RST-supported programs for five countries, Bangladesh, Barbados, Costa Rica, Jamaica, and Rwanda. Under the RST lies a financing facility called RSF which aims at supporting the efforts of national authorities to be better prepared for future pandemics, sustain a low carbon growth rate and achieve climate-resilient development outcomes.
To better understand RSF facility’s key features and eligibility criteria, AfriCatalyst, an-Africa based global development advisory firm, has developed a practical guide to inform policymakers and domestic stakeholders.
During a presentation of the main objectives the RST offers during the workshop, Ms. Fenohasina Rakotondrazaka Maret, Senior Advisor at AfriCatalyst, said access to this financing will be granted based on the nations' reform strength and debt sustainability after IMF’s assessment.
“There is no defined template on how countries can access this financing because each country has its own reforms- IMF only plays a catalytic role in the approval of these reforms,” she said.
The issue of collective action from multilaterals and other regional development banks in giving highly concessional financing arose – with experts warning that the IMF will not be able to play it’s catalytic role as countries are near debt distress or are already distressed.
Out of the five countries globally who have an RSF-supported program approved by the IMF, Rwanda is currently the only African country.
“IMF is supposed to play a catalytic role; in theory it can in practice it cannot because its own analysis will say countries cannot borrow to fill the gap which is there, but we will not get there unless we have collective action,” “said Ali Mansoor, Senior advisor Africatalyst
Africa’s debt is at its highest level in over a decade. As a result of COVID-19, the Russian invasion of Ukraine, and soaring inflation, African countries have had to take on even more debt, and now many countries are either bankrupt or at high risk of debt distress. Speaking at the workshop, ECA Director, Macroeconomics and Governance Division, Adam Elhiraika noted that the past six decades, every global recession has led to a rise in global government debt and that many African countries had increased their public debt. A bulk of the public debt being incurred between 2020 and 2021 when countries sought to combat the impacts of the Covid-19 pandemic.
Out of the five countries with RST-supported programs, Rwanda is currently the only African country. “The focus of Rwanda’s RSF program of USD 319 million is on integrating climate-related considerations in macroeconomic formulation to support the delivery and monitoring of climate commitments,” noted Ali Mansoor, Senior advisor Africatalyst
AfriCatalyst CEO, Daouda Sembene noted the need for African countries to raise additional financing to meet their needs- but available resources remain limited. While observing a CPI report that estimates about $2.8 trillion of climate finance needs of about 52 African countries under the Nationally Determined Contributions.
“The contribution of RST in climate financing should be seen as a token of contribution that can be used as a leverage to attract more resources from partners including the private sector” he noted.
Mr. Sembene also emphasized on the importance of pushing for Special Drawing Rights rechanneling to Multilateral Development banks particularly the African Development Bank to help countries address their financing challenges. He however noted that this is not a substitute to the Resilience and Sustainability Trust(RST); it is a compliment for the resources that countries from Africa will be receiving from the IMF.