Addis Ababa, 21 July 2022 (ECA) – As part of its regular Price Watch Dialogue series, the African Centre for Statistics (ACS) at the Economic Commission for Africa (ECA) hosted, on 21 July, a policy dialogue on the impact of the Ukraine-Russia conflict on commodity and food prices in Africa.
In his welcoming remarks, Oliver Chinganya, ACS Director, stated “Africa, in the last two years, has been hit by exogenous shocks that undermine its dreams of prosperity.
Interest rate hikes, increased borrowing costs, weakened currencies and tightening global financing conditions have had dire implications on the fiscal space of low and middle-income countries.”
Rising consumer prices, particularly rising food prices, are increasing inflationary pressures. Critical items like oils, fats and vegetables are up near 10% in Morocco, whilst the price of staple foods like cooking oil and wheat have risen by almost 50% in Kenya.
Thus, to cope with market turbulence, nations have sought to pass on costs to consumers and seek external help. Increased food costs put vulnerable populations at increased risk of food insecurity.
The ECA estimates the food crisis could further reduce Africa’s fiscal space by 7% of GDP on average.
The double-shock driven by the Ukraine-Russia crisis, and global conditions threatens to unleash a third debt crisis in Africa.
Rising interest rates and tighter financial conditions limit government fiscal space while additional spending is needed.
Consequently, ECA is supporting Member States to reduce the severity of the food crisis through the Africa Trade Exchange Platform (ATEX). The ATEX is a pool procurement marketplace, which has the potential to strengthen Africa’s economic resilience.
“The platform can mitigate the supply shocks by pooling and aggregation Africa’s demand and supply to enable the negotiation of competitive prices and facilitate the delivery of essential commodities at affordable prices while boosting regional trade,” explained ECA economist, Wafa Aidi.
The webinar discussed further solutions to counter a third debt crisis in Africa, including the need for African countries to prioritize the implementation of the African Continental Free Trade Area, support agriculture production and improve the resilience of agricultural systems.
To address the tightening fiscal space, there’s need for immediate debt-service relief and waiving of surcharges, especially for countries with large borrowings.
Another recommendation was on the need to refashion the SDR quota by increasing the share allocated to developing countries and triggering an automatic release of adequate SDRs during crisis; and extend the DSSI through December 2023 with interest payments deferred.
Minister of Finance and Economic Planning of Rwanda, Uzziel Ndagijimana added to the discussion by suggesting the longer-term responses that are also required, “Covid-19 and the Ukraine-Russia conflict found us unprepared.
It is time for Africa to embark on structural transformations – to develop and invest in its infrastructure, agricultural production, human capital and regional trade.”
The next session of the webinar policy dialogue organized by the ECA will take place in three months’ time.