Introduction section First G20 Africa Advisory Group meeting under the Italian G20 Presidency
First G20 Africa Advisory Group meeting under the Italian G20 Presidency
On Thursday 15 April 2021, the G20 Africa Advisory Group held its first meeting under the Italian G20 Finance Track Presidency.
The Group, created under the German G20 Presidency in 2017, is responsible for steering policy actions under the G20 “Compact with Africa” (CwA) framework. Nurturing a propitious environment for private investment in African countries and fostering growth and sustainable development are listed among the main objectives of this Group.
The G20 Africa Advisory Group is co-chaired by Germany and South Africa, and comprises G20 members, African Compact Countries, namely: Benin, Burkina Faso, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia. Other stakeholders include the World Bank (WB), the African Development Bank, the International Monetary Fund (IMF), the European Commission and the Organisation for Economic Co-operation and Development (OECD).
The COVID-19 pandemic has triggered the worst economic and social crisis in generations but the impact of the crisis has been disproportionally harsher in developing countries. In this sense, it is important to address the diverse needs and challenges faced by African countries, in particular to overcoming the pandemic and boosting the economic recovery.
In this context, the G20 Finance Track has a pivotal role in linking recovery efforts with the promotion of longer-term strategies aimed at supporting a transformation towards greener, more inclusive and digital societies. As greener and digital investments are key to building more resilient economies, enabling emerging markets and developing economies, in particular African countries, to finance critical spending and to mobilise funding for the green transition and digitalization, is one of the priorities of the Italian G20 Presidency.
The G20 Africa Advisory Group is responsible for monitoring progresses made by Compact Countries and proposing new policy recommendations based on the Compact Monitoring Report. The added value of this initiative is clearly shown by the fact the, despite the COVID-19 pandemic, growth in CwA countries (1.1% in 2020) is faster than average African countries and is expected to rebound to 3.4 percent in 2021. Nonetheless, public debt is expected to increase to 80% of GDP in 2021 (from 71% in 2019).
The agenda of this first virtual meeting featured discussions on the effectiveness of the crisis response measures implemented to mitigate the impact of the COVID-19 pandemic to low income countries, and on the role of the African private sector as far as financing for development is concerned.
The meeting offered the chance to hear from Ethiopia, Tunisia and the Republic of Côte d'Ivoire’s representatives, about the impact the COVID-19 pandemic is having on their population and to what extent this crisis may affect private-sector investments.
International Organisations, like the WB and the IMF, which are very much involved in identifying policy measures to support the most vulnerable countries in various G20 lines of work, presented the result of their studies on private sector financing. Thanks to the informed reforms the CwA countries have committed to in 2018, they have been able to strengthening their macroeconomic and business frameworks (most with IMF support in 2020) by leveraging digital solutions and financial frameworks which resulted in facilitating secured lending.
So far the G20 has prioritised providing support for the most vulnerable countries, backed up recently by a package of concrete measures, most notably through the new IMF general Special Drawing Rights allocation of USD 650 billion.
With regards to debt relief, while some of the Compact Countries have benefited from the Debt Service Suspension Initiative (DSSI) - a temporary measure to provide liquidity approved in April 2020 which recently was granted a final extension until December 2021 – countries with unsustainable debt will have the opportunity to move towards a more structural response to debt vulnerabilities, when appropriate, under the “Common Framework for debt treatments beyond the DSSI”.
Finally, with the aim of providing new financing, the last G20 Ministerial meeting supported the advancement of IDA-20 negotiations by one year.
The Compact with Africa is a potential blueprint on how to forge broad partnerships, which also include the private sector. It can offer useful lessons on issues such as governance and institutional features, and provide opportunities to explore synergies with the ongoing work on Country Platforms. In this regard, the Compact provides also good examples of how International Financial Institutions could work together towards shared goals.
Moreover, reform-minded Compact with Africa countries are in the best post position to champion the Africa Continental Free Trade Area (AfCFTA) by leading the way on and accelerating the implementation of the Agreement and securing benefits from increased trade.
The recommendations of this Group will feed into the other G20 streams of work and they will reassess for the second meeting in October 2021.