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Boosting Africa's resilience to the adverse impact of the Ukraine crisis

Boosting Africa's resilience to the adverse impact of the Ukraine crisis

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From expanding social safety nets and improving governance to boosting intra-African trade, the chief economist of a United Nations regional body in Africa proposed a series of measures to boost Africa’s resilience in the face of the risks and uncertainties arising from the Ukraine crisis, which has deteriorated the social and economic fallout from the COVID-19 pandemic.

Speaking virtually to 130 online participants, including Resident Coordinators, economists, and other UN staff members across 54 African countries, Hanan Morsy, Deputy Executive Secretary and Chief Economist at the UN Economic Commission for Africa (ECA), delivered a presentation on the adverse impact of the Ukraine crisis, underlining rising inequalities in African economies, renewed supply chain disruptions and worsening socio-economic stress levels amid persistent global shocks.

Ukraine and Russia are two of the major global suppliers of agricultural commodities, fertilizers and energy. “These two countries together account for over half of the global market share in sunflower oil, for example. A third of the world’s wheat production comes from Ukraine and Russia, and they supply nearly a fifth of maize globally,” she said.

ECA estimates that food prices reached a 14-year high in March. Oil prices have surged to the highest since 2008. Fertilizer prices have also skyrocketed.

“If we look at the trade exposures among Africa, Russia and Ukraine at an aggregate level, it’s not that significant. But the issue here is the concentration. African imports from Russia and Ukraine are concentrated in a few products and countries,” Ms. Morsy said. 

She indicated that the top ten African importers from Ukraine and Russia – Egypt, Ethiopia, Kenya, Libya, Morocco, Nigeria, Senegal, South Africa, Sudan and Tunisia – are exposed to the crisis as they depend heavily on imports of wheat and maize. 

“It’s important to remember that these ten countries constitute half of the population of Africa and two-thirds of the continent’s gross domestic product. So even though it’s just ten countries, there are significant implications for Africa as a whole, including looming food security risks,” she said.

In addition, households across the continent spend the bulk of their income on food, much more than any other region in the world. An increase in food prices translates into more out-of-pocket expenses and a negative impact on living standards and quality of life. 

Ms. Morsy suggested that African countries should design targeted social safety nets to mitigate the impact of rising food and energy prices on the most vulnerable, and improve governance and halt any revenue leakages.

She told Resident Coordinators that net energy exporters would see gains and some improvement in their financial position and current account balance. In contrast, 43 African countries, which are energy and food importers, are expected to face pressure on their fiscal and current account balances. Oil-exporting countries should utilize windfalls to support economic recovery and replenish their policy buffers. 

Participating Resident Coordinators reiterated that the effects of the social and economic impact of the Ukraine crisis were already being felt at the country level.

Elena Panova, the Resident Coordinator in Egypt, said that between 2018 and 2020, 80 percent of imported wheat came from Ukraine and Russia to the country. In March, the government issued a decree to fix prices for unsubsidized bread as an emergency response to the inflation spike.

She pointed out that the Government of Egypt swiftly introduced a series of emergency measures to mitigate the economic impact of the war in Ukraine, including by earmarking an additional US$148 million in the national budget to cover 450,000 new families under the social safety net programmes.

Ms. Panova underscored that the UN’s value propositions could include providing a rapid assessment of the effects of the crisis on the most vulnerable people in Egypt, and continuing to support the government with the second wave of economic reforms.

The discussion also focused on the importance of turning the challenges affecting African economies into opportunities, using the continent-wide free trade agreement as an entry point.

“We need to advocate to accelerate more trade among ourselves because many of these products can be found in other African countries,” said Siaka Coulibaly, UN Resident Coordinator in Senegal.

He added that Africa must seize the critical opportunity to build more strengths with a more fluid trade among African countries and realize more profound structural reforms of agriculture that will promote industrialization.

Participating in the online webinar from Angola was Zahira Virani, UN Resident Coordinator, who also zoomed in on a country perspective, stating that the war in Ukraine could have some mixed repercussions in the vulnerable Angolan socio-economic context.

She pointed out the difficult food security situation in the country, where the southwestern provinces are experiencing the worst drought in 40 years, with an estimated 5 million people suffering from insufficient food consumption in a country of 33 million people, according to the World Food Programme.

Despite the current diversification efforts to reduce food import dependence, wheat imports from Russia have increased significantly in the past years, from roughly US$45 million in 2020 to around US$65 million in 2021.

Ms. Virani said, however, that the upsurge in oil prices, and potential windfalls in government budgets, could provide oil-dependent countries, such as Angola, with an opportunity to increase fiscal space and boost investments in the productive and social sectors for a more inclusive and effective transformation of the economy.

“The COVID-19 pandemic reversed hard-won gains in poverty reduction in Africa, pushing 47 million people into extreme poverty, increasing new poor by 55 million, and adding 46 million people to those at risk of hunger and undernourishment,” Ms. Morsy said.

“Even before the Ukraine crisis, the COVID-19 pandemic had already led to the worst economic recession in half a century across Africa”, Ms. Morsy explained, “with the real GDP contracting by 3 percent in 2020.”

Africa’s real GDP growth is projected to contract by 0.7 percentage points due to the Ukraine crisis, and inflation is expected to rise by 2.2 percentage points, pushing more people into food insecurity and poverty.

“Countries should take full advantage of the African Continental Free Trade Area, increasing intra-African agri-food, industry and services trade, in order to build resilience against external shocks and bring back on track Africa’s recovery from COVID-19,” she added.

The special webinar to discuss the impact of the Ukraine crisis on Africa was organized on 24 March 2022 by the ECA and the Regional Office for Africa of the UN Development Coordination Office (DCO) and moderated by Yacoub El-Hillo, the DCO Regional Director for Africa. 

Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).