How African governments, particularly ministries of finance, are tackling COVID-19
With the exception of South Africa and Egypt, COVID-19 infections in Africa have remained low relative to other regions. Although this could still change, quick action and known methods of curbing infections may save the continent from a crisis that could overwhelm healthcare services and public finances. However, measures to curb the rapid rise in infections, such as hard lockdowns and the resultant slowdown in global output, have had a devastating effect on African economies and public finances.
Despite shrinking revenues, African governments have taken extraordinary measures in their response to the pandemic. Some of these measures have included monetary and fiscal policy changes budget reprioritization and support to vulnerable households. Common budgetary responses include reprioritization to bolster health expenditures, stalling capital expenditure, and accessing emergency funding from international financial institutions.
Measures taken by African governments align with the call made by World Health Organization Director-General, Tedros Adhanom Ghebreyesus to African governments: “In other countries,” he said in March 2020, “we have seen how the virus actually accelerates after a certain tipping point, so the best advice for Africa is to prepare for the worst and prepare today.”
But even viable efforts to mitigate the crisis will press many African countries’ already-strained budgets to the breaking point – or beyond. As it is, Sub-Saharan African countries allocate an average of only 7% of their general government budget to health, compared to 15% for OECD countries. The cumulative effect of low spending has left many of these countries with precarious health systems that struggle to provide ordinary services, let alone respond to a pandemic.
Under-investment is the main reason Africa’s health systems are weak. And the lack of fiscal space for emergencies like the pandemic – due to unsustainable levels of debt and shrinking savings – makes matters worse. African governments have also been reluctant to make hard decisions that require reallocating budgets and reversing wage increases for public-sector employees.
Some governments have been pro-active. South Africa, which has one of the continent’s highest infection rates, has reversed earlier wage agreements with labor unions in order to mobilize emergency funds for COVID-19, alongside expansionary monetary policy and tapping surplus funds held by public financial institutions. The Solidarity Fund set up by the South African government has also attracted contributions from the private sector.
Mozambique and Angola increased health expenditures by USD30 million and USD40 million, respectively. Senegal cut its operating budget, deferred investments, and allocated USD107 million towards COVID-19 expenditures.
Several countries, such as Botswana, Cameroon, South Africa, and Ghana, have instituted streamlined procurement processes, made allowance for single-source procurement, or expedited purchase orders and payment of arrears. Others, such as Algeria, have relaxed contractual deadlines for companies rendering services to the public sector and suspended penalties for delays.
Recognizing both the importance of robust PFM systems and timely information sharing when tackling an extraordinary crisis, CABRI launched the COVID-19 Africa Public Finance Response Monitor, on 23 April 2020. Since its launch, the Monitor has been updated three times with insights into how African governments are responding to the fiscal implication of COVID-19 through (i) regulatory and procedural amendments within the PFM system; (ii) budget adjustments and reallocations; (iii) resource mobilization; (iv) social sector and business support; (v) monetary policy measures; (vi) strategic purchasing of drugs and medical equipment; and (vii) transparency and accountability measures.
It is estimated that Africa will need approximately USD 114 billion in 2020 to fight COVID-19. CABRI has found significant variances, both absolutely and as a percentage of GDP, in countries’ projections of their financing requirements associated with COVID-19. Countries, such as Benin, Burundi, Congo, have estimated the requirement only for healthcare financing. These plans range from 0.7% of GDP in the DRC to 3% of GDP in Benin. Other countries, including Botswana, Burkina Faso, Cote d’Ivoire, Ethiopia, Namibia, Mauritius, Nigeria, and South Africa, have prepared comprehensive plans, which include costs associated with stimulating the economy and supporting business and vulnerable households. These plans average around 5% of GDP, with South Africa being an outlier at 10% of GDP. It is unsurprising that these estimates are changing rapidly – Burundi, Cameroon, and Niger approximately doubled their estimated financing requirements between March and May.
Going forward, African governments will need to consider several policy options relating to procurement, taxation, and public finances, amongst others.
In order to increase the continent’s bargaining power and avoid unnecessary competition in the procurement of emergency health supplies, the African Union has launched a pan-African procurement strategy. This will prepare the Continent for the purchase and distribution of a COVID-19 vaccine when one is ready. Although imposing new taxes before economies recover will be difficult, greater voluntary taxation could enable governments to tap resources for activities such as disaster relief. A further reprioritization of budgets, in addition to measures already taken, will be necessary to increase expenditures for COVID-19 responses and economic recovery strategies. And lastly, African governments’ financing of health care services for future crises and responses to extraordinary financial pressures will be critical.
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