Recognising 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 mobilisation; (iv) social sector and business support; (v) monetary policy measures; (vi) strategic purchasing of drugs and medical equipment; and (vii) transparency and accountability measures.
This blog provides an overview from the Monitor of how African governments, particularly ministries of finance, are tackling to COVID-19. The World Bank and IMF have estimated that Africa will need approximately USD 114 billion in 2020 to fight COVID-19. The Monitor reflects significant variance, both absolutely and as a percentage of GDP, in countries’ projections of their financing requirements associated with COVID-19. Some 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.
The Monitor also reflects that African ministries of finance have been central in supporting the COVID-19 response, by rapidly reallocating existing funds and developing supplementary budgets and spending plans. Nigeria, in addition to announcing a stimulus package, has cut capital spending by 20% to finance COVID-related spending and as a result of a lower oil price. In Angola, the Executive announced additional healthcare spending of USD 40 million to be funded, in part, by freezing 30% of its goods and services budget and suspending CAPEX until completion of the Budget Review. Senegal announced cuts on operating expenses and deferred investments of 159 billion CFA francs. In Zimbabwe, the Treasury will redirect most of the country's 2020 capital expenditure budget towards fighting Covid-19, including water supply and sanitation. While recurrent budgets are also seeing significant cuts, it is clear that capital expenditure is being scaled back most, exacerbating the continent’s existing annual USD 68–108 billion infrastructure financing gap.
In addition to reprioritising spending, the Monitor reflects that PFM rules and processes have been adjusted to ensure improved coordination and rapid delivery of emergency services.
Several finance ministries, including Benin, Chad, Comoros, Eswatini, Guinea and, Mozambique have established COVID-19 units or committees to centralise decisions on resource allocation. The Ghanaian Ministry of Finance has constituted a 5-member ‘MoF COVID-19 Response Team’ to ensure rapid processing of COVID-19 payment requests; review and validate request for funds; provide feedback to management on drawdowns of emergency funds; and maintain a matrix of all COVID-19 initiatives for coordination purposes.
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.
While there is not yet much information publicly available on how countries are ensuring continued treasury operations during lockdowns, Zambia implemented measures to enable operational continuity by making it possible for officers to work remotely. This decision ensured continuity in cash and payroll management and other public finance operations.
Interestingly we are also already seeing flexibility in terms of fiscal rules, such as debt and deficit ceilings. At a national level, Ghana is considering suspending the Fiscal Responsibility Act’s 5% deficit rule, by 1.1% of rebased GDP. At a regional level, the West African Economic and Monetary Union (WAEMU) has declared a temporary suspension of its convergence criteria, including the 3%-of-GDP fiscal deficit rule, to help member countries cope with the fallout of the Covid-19 pandemic. It is likely that we will see many more allowances for deviating from fiscal rules; it will be interesting to observe when and how countries return to pre-crisis fiscal rules.
The COVID-19 Africa PF Response Monitor will continue to be updated every 10 days. Thus far, information collected has come primarily from publicly available sources, including official press releases and budget documents. However, a survey has been sent to African ministries of finance to learn how they have used their PFM systems to reallocate resources, disburse, track and account for emergency expenditure, and ensure effectiveness and efficiency of spending. The addition of this information to the PF Response Monitor will allow this tool to develop into an invaluable repository of PFM responses during a crisis.