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Ph:DR: ECA Report-2023: “Strengthening Africa’s Resilience to Global Economic Shocks”
Climate-induced catastrophic events have led to serious humanitarian crises in Africa. Between 2000 and 2022, a total of 407.5 million people in Africa were affected by natural disasters. During this period, 4.2 million people were left homeless, 53,610 people died and 52,205 were injured. This is what emerges from the Economic Report on Africa of the United Nations Economic Commission for Africa (ECA), the launch of which is scheduled for Monday, December 18, 2023 in Abuja, Nigeria.
Titled : » Strengthening Africa’s resilience to global economic shocks « , The report shows that climate shocks are generally strongly correlated with the cyclical component of GDP growth and not with the long-term trend in Africa, suggesting that some of the observed volatility in growth emanates from climate-induced shocks. the climate. An increase in temperature beyond a threshold of 0.7 degrees centigrade results in a reduction in real GDP growth.
With a temperature change of 1.8 degrees centigrade, which is expected to be the case by 2030, if current trends persist, we could expect a 2 percentage point decline in real GDP growth, which would erode the benefits of positive shocks, such as soaring commodity prices, and amplify the impact of negative shocks. Additionally, the report’s preliminary results show that the frequency of natural disasters directly increases public debt levels. A one-unit increase in natural disasters could lead to a 0.25 percentage point increase in the ratio of net public debt to GDP.
More significantly, climate change in Africa tends to derail poverty reduction and, in some cases, destroy the livelihoods of millions of people who rely primarily on agriculture and small businesses. Droughts, floods, frosts and other natural events that result in crop failures affect the well-being of households living in rural areas and small towns. According to the report, a one-unit increase in the frequency of natural disasters would lead to a 4.4% increase in the percentage of households living in extreme poverty.
The report contains important lessons on how African countries should integrate climate change into the design and implementation of their long-term growth strategies. The report notably calls for a development strategy for countries that “take advantage of their natural resources in ways that stimulate economic growth while gradually reducing the intensity of carbonization associated with economic activity, particularly production, transport and consumption. To do this, it is necessary to adopt a green industrial policy at the heart of the design and implementation of the national development strategy.
To finance this transition to sustainability, the report recommends the issuance of green and blue bonds that can exclusively direct financing towards projects with climate and environmental outcomes aligned with the Sustainable Development Goals (SDGs). Debt-for-nature swaps envision climate and nature transactions with positive environmental impacts and can also contribute to Africa’s debt sustainability and provide countries with additional fiscal space to invest in resilience and sustainability actions. climate adaptation. Developing a mechanism that would facilitate the repurchase of debt and its reissuance at lower rates would be a key factor in enabling countries to sustainably restructure costly existing debts and invest the savings in climate resilience.
Currently, ECA is supporting the operationalization of the Sustainable Debt Coalition initiative, which supports these financing mechanisms to help address debt management challenges in Africa. (Source: CEA)
