Paris is hosting this Tuesday the Summit on Financing African Economies attended by 17 African heads of state, European leaders and major banking institutions such as the World Bank and the International Monetary Fund. The summit aims to create a "massive aid package" valued at around 34 billion dollars for the African continent, affected by the covid-19 pandemic, and at the same time lay the foundations for a new cycle of growth, supported by private sector investment.

The former executive secretary of the United Nations Economic Commission for Africa, Carlos Lopes, says that these measures will not solve the underlying problems of the continent, which would need $200 billion to return to the level of economic activity that existed before the crisis.

The Guinean economist recognizes, however, that France was the first country to show interest in negotiating a solution to the African debt problem with the G7 countries. 

What is France's goal in organizing this summit?

France has been showing a certain originality in trying to solve the liquidity problem of African economies. It was the first country to talk - to the members of the G7 - about the need to discuss the debt issue in a more comprehensive way and not limited to, let's say, the measures adopted so far. They are too timid measures that do not produce any results and that only postpone the African countries' difficulties.

[France] was also one of the countries that insisted on the need for the IMF to change its course a bit and, instead of just talking about increasing the current programs, to make use of its Special Drawing Rights, which are rights that are normally related to helping countries in terms of liquidity and that should apply in times of crisis. Times of crisis cannot be greater than those we are experiencing now with the pandemic.

France proposes massive aid to the African continent, it talks about the exchange instruments that are known as the Special Drawing Rights. How do these mechanisms work?

It is a mechanism that all IMF member countries are entitled to and that is based on the principle that IMF reserves can be used to issue liquidity in times of crisis or in exceptional situations. African countries have normally used some of this liquidity because they are often in situations of difficulty, but there is a reserve that allows them to do this in the conditions in which they were used until now, but in times of pandemic they can be used at 100%.

That is what France and many African countries are proposing to do. The principle has already been adopted that there is going to be, in fact, a possibility of access to Special Drawing Rights by every country in the world, which means that we have a liquidity of about more than 650 billion dollars to distribute. It's just that countries can only access them according to their economies.

Exactly because the IMF imposes some limitations. What are these limitations and how can you get around them?

The limitations of the IMF are the limitations of the very contractual rule that the member countries are obliged to follow. Therefore, African countries can access the maximum of these Special Drawing Rights, depending on their economies - which in this case would be about $34 billion - which is very little for their needs and is very little in relation to what access could be if the other countries that are not going to use - because the rich countries do not need to use this mechanism - made their rights available to African countries and other poor countries.

What is it? In practical terms it is precisely the measure that this summit, called by President Macron, is persuading a number of G7 countries to comply with. 

The aim is to avoid the indebtedness of African countries. The truth is that we constantly hear about the difficulties the continent has in paying the debts it has contracted with international partners. What is it that has failed?

What has failed is that any economy only grows with access to credit. African countries are the countries that have the least access to credit because their financial markets are very small, because they have difficulties through the ratings that are done by the risk agencies to access commercial capital, and because the funds that were normally available from the financial institutions that help with concessional loans, such as the IMF, World Bank, African Development Bank, etc., are limited and are not of a nature to be able to meet the growth needs of African countries.

Just to give you an idea, the continent has doubled its GDP in the last 20 years, but concessional lending has not doubled. So there is a funding gap in African economies and because of that there is a great difficulty in being able to access capital. So this allows those who are the commercial players in the market to make those loans at very, very high interest rates at a time when in the rest of the world interest rates are very low. If a country like Portugal or Spain makes an international loan it will pay interest up to 1%. Germany pays even negative interest, Great Britain pays negative interest, while a typical African country will pay between 7 and 9%. So it's a brutal difference and that creates debt difficulties.

And could these Special Drawing Rights give African countries credibility in the market when they go to borrow?

They can help. It is indeed a factor that can alleviate a little bit the liquidity needs of African countries, but it is not enough. My analysis is that African countries need about $200 billion to be at a level of subsidizing their economies in pandemic time, let's say, average relative to what other countries have done and continue to extend in terms of stimulus packages to their economies.

The difference is that a country like the United States or a country like France, in this case the European Union, can print their currency - because their central banks print their currency, today it is not that physical printing, it is through electronic mechanisms, mechanisms to stimulate economies that are more sophisticated - while African countries are not in a position to do so, precisely because the IMF rules do not tolerate these countries being able to do so because there is a classification of conditionalities from which they cannot free themselves.

So, this is what requires a deeper debate that, hopefully, this meeting in Paris will give a breath of fresh air. I don't think that there are great expectations that it will solve the problem because it is a systemic problem, but at least that it will give some encouragement and that it will go in the right direction. 

Are these bank guarantee mechanisms, which will allow the African private sector to borrow at normal interest rates and even finance imports, good news?

This is good news, but it is not enough. It is important to give these measures a positive note, but it is also important not to create expectations that these measures will solve the fundamental problems. They will not solve the problems of access to credit - although it will improve the situation a little, but there will still be great difficulties - and they will not solve the problems of the pandemic either, because what Africa has lost in the last 18 months is very significant.

It is the first recession in the last 25 years and it is deep and therefore, in order for us to return to the level of economic activity and access to liquidity equivalent to what existed before the crisis, we should have at least $200 billion. What we are talking about is $34 billion that is given directly by this IMF measure and that France wants to increase by offering its own rights - France alone has $25 billion - and trying to get other countries of France's size to do the same.

Does the long-term growth of the African continent inevitably come through the private sector?

Pass it on. I don't understand how we can get out of dependence on raw materials, which represent about 70% of African exports - oil alone represents 40% of African exports - without industrialization. And for us to industrialize, we will not industrialize with the public sector. There has to be a fundamental role here in promoting large companies, the national champions of the African private sector.