ECOWAS plans for economic fallout from COVID-19
April 26, 2020
LEADERS of the 15-member Economic Community of West African States (ECOWAS) have come up with plans for economic recovery after the global COVID-19 pandemic has subsided.
During their video conference last week, they agreed to issue long-term treasury bills and bonds “to finance critical investment needs to support the private sector and revive economies”.
Through the various Central Banks, the leaders said in their communique after their meeting that there would be support for commercial banks and financial institutions to fund the private sector, especially small and medium enterprises (SMEs).
At the outset of the coronavirus, the International Monetary Fund’s forecast was for economic growth in the ECOWAS region, projected at 3.3 per cent, to fall to two per cent if the pandemic were to end in June.
But it would fall to -2.1 per cent if adequate measures were not taken to slow down the spread of the virus and if the pandemic continued beyond the second half of 2020.
In this light, member states have been seeking extra funds from international financial institutions to tackle the socio-economic challenges that they are facing.
At the same time ECOWAS is fully backing the African Union’s initiative to negotiate with various lenders for the cancellation of public debt and restructuring of private debt of African countries.
The issue has been compounded by a World Bank report last week, which showed that remittances to sub-Saharan Africa were projected to fall from $48 billion in 2019 to $37 billion in this year – a drop of 23.1 per cent – because of the economic consequences of the COVID-19 pandemic.
This will affect Nigeria and Ghana the most, the top two ECOWAS members that received remittances in 2019.
ECOWAS leaders acknowledged the effect of the drop in financial resources for the overall economy of the region.
They now want to reduce their countries’ import bills by providing more financial support for local production of consumer goods, especially agricultural products.
Crucially, there will also be more state funding for the local pharmaceutical industry as well as the health protection equipment manufacturing sector, whose output covers barely 20 per cent of the region’s current consumption needs.
The leaders pledged to “avoid the imposition of import restrictions on other ECOWAS countries, particularly with regard to essential goods [such as] drugs [and] food”.
They called for humanitarian transport corridors to remain open for medical and other personnel to travel in the region as they try to contain the pandemic.
The leaders reminded member states to allocate at least 15 per cent of their annual budget to the health sector, which they themselves agreed to in 2014 following the Ebola outbreak in Guinea, Liberia and Sierra Leone.
Member states were also called upon to pool their resources when buying equipment and drugs to combat COVID 19.
The leaders agreed to hold a meeting of the Convergence Council to consider the full impact of the pandemic on macroeconomic convergence in 2020 and beyond.