{"id":58688,"date":"2022-09-27T02:15:42","date_gmt":"2022-09-27T02:15:42","guid":{"rendered":"https:\/\/www.africannewspaper.net\/2022\/09\/27\/could-an-african-stability-and-liquidity-mechanism-avert-a-debt-crisis-african-business\/"},"modified":"2022-09-27T02:15:57","modified_gmt":"2022-09-27T02:15:57","slug":"could-an-african-stability-and-liquidity-mechanism-avert-a-debt-crisis-african-business","status":"publish","type":"post","link":"https:\/\/www.africannewspaper.net\/2022\/09\/27\/could-an-african-stability-and-liquidity-mechanism-avert-a-debt-crisis-african-business\/","title":{"rendered":"Could an African Stability and Liquidity Mechanism avert a debt crisis? – African Business"},"content":{"rendered":"\n
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As they struggle for investment to support post-Covid recovery, African governments face the specter of a debt crises that could become as large as that of 1980s.<\/p>\n

This crisis can only be solved by a more stable, liquid market in African government bond bonds, argue Daniel Cohen (chair of Finance for Development Lab) and Ibrahim Elbadawi (managing director of the Economic Research Forum) in a recent in an a recent policy brief<\/a>.<\/p>\n

According to the authors, such a market is possible by combining specific tools within a regional African financial arrangement known as the African Stability & Liquidity Mechanism (ASLM).<\/p>\n

Unprecedented challenges<\/h2>\n

The world faces the greatest economic challenges since 2007-08’s financial crisis.<\/p>\n

As a result of the Covid-19 epidemic and associated lockdown restrictions, global supply chains continue to be in disarray. Inflationary pressures were already present before the Russian invasion of Ukraine. However, the war has reduced the supply of basic foodstuffs like wheat and vegetable oil from Black Sea importers, driving up food costs. At the same time, international efforts to deter Russian aggression, coupled with Moscow\u2019s response to them, has led to a spike in oil and gas prices.<\/p>\n

This is making it harder for African governments to secure investments in post-pandemic recovery, essential infrastructure, and climate change mitigation as part sustainable development. Beijing was once a major source for finance for infrastructural project, but the Chinese government has drastically reduced funding for such investment streams over the years that led up to the pandemic.<\/p>\n

Partly because of plentiful Chinese lending \u2013 much of it for badly needed projects \u2013 the sovereign debt of many African governments has built up in recent years, but they now face much higher servicing costs and greater difficulty in securing new lending.\u00a0<\/p>\n