UNDP: NEW CRISES LOOMING IN AFRICA IN WAKE OF WAR IN UKRAINE
Posted May 24, 2022
New York, 24 May – In a new report issued today, the United Nations Development Programme (UNDP) warns of the direct and indirect impacts of the war in Ukraine on the African continent, which could further stall the continent’s development trajectory already significantly jeopardized by the COVID-19 crisis.
This report, entitled “The Impact of the War in Ukraine on Sustainable Development in Africa”, reinforces findings of the Global Crisis Response Group (GCRG) that the war in Ukraine is pushing the 2030 Sustainable Development Goals and the aspirations of the African Union’s Agenda 2063 further out of reach, and provides key recommendations for actions that need to be taken immediately, to avert further crises in Africa.
“Africa is facing a double crisis with the combined effects of the war in Ukraine and of the COVID-19 pandemic. However, with strategic partnerships, the crisis also presented the opportunity to rechart Africa's development trajectory, breaking away from a dependency cycle” said Achim Steiner, Under-Secretary-General of the United Nations and UNDP Administrator. “Now is a critical time for action. It is time to intensify efforts and reframe development finance, strengthen resilience in African economies, and foster economic transformation as a key driver for change in Africa.”
According to the report, some of the direct impacts of the crisis in Africa include trade disruption, food and fuel price spikes, macroeconomic instability, and security challenges. African countries are particularly affected due to their heavy reliance on imports from Russia and Ukraine.
The current hike in prices for food and fuel directly affects the entire continent, including the biggest economies, as food and fuel account for over one-third of the consumer price index in most African countries, (Nigeria 57 per cent, Egypt 60 per cent, Ghana 54 per cent, and Cameroon 42 per cent). In 2020, African countries imported USD 4 billion worth of agricultural products from Russia, 90 per cent of which was wheat.
In addition, the war in Ukraine has led to a 21 per cent increase in the price of fertilizers, affecting African populations who remain mainly reliant on agriculture. Shortages and interruptions in food and fertilizers supply chains will increase hunger in Africa. The impacts of fertilizers shortages will affect this year's planting season and will be felt throughout next year. Export growth in Africa risks being shrunk by half and is now estimated at 4.1% in 2022, as opposed to 8.3% had the war not occurred.
“African governments are left with limited finances to implement adequate policy responses and protect vulnerable groups while also preventing societal and economic destabilization,” said Ahunna Eziakonwa, UN Assistant-Secretary General and Director of UNDP's Regional Bureau for Africa. “Overall, the war in Ukraine constrains economic activity and could trigger further social tensions and unrest, which could have regional and global ramifications. Some key measures could be taken urgently to avert the worse.”
The war in Ukraine is already causing disruptions in financial markets and an increase in risk aversion among investors could potentially trigger capital outflows from African countries, leading to currency depreciation, a drop in equity market prices, and an increase in risk premiums for bonds. Additionally, the looming increase in global interest rates may worsen Africa’s debt position, particularly for countries whose debt repayments are due in 2022 and 2023. Likewise, an increase in domestic interest rates will have a negative effect on both domestic debt service payments and the capacity of small and micro enterprises to borrow.
UNDP’s new report proposes three main areas of action that could mitigate the impact of the war in Ukraine on Africa.
- Prioritization of immediate efforts to expand the fiscal space in African countries and stabilize African economies via enhanced development assistance, innovative multilateral initiatives (including the expeditious re-channelling of SDRs), and support for programmes that enhance domestic resource mobilization.
- Strengthening of Africa's resilience to global shocks via reducing dependency, accelerating a just energy transition, de-risking critical investments in technology and infrastructure, and promoting innovative approaches to entrepreneurship, particularly for women and youth.
- Fostering structural economic transformation in Africa by harnessing digital technologies, and intensifying support to regional integration and economic diversification.
In addition, UNDP is launching a new data initiative as part of its Data Futures platform; a global resource to empower policy decision-makers with the best of data and insights. The new site will offer users the opportunity to review the impact of the war in Ukraine on global trade, for different countries. A visualization tool also lets users explore the import and export trade data for Ukraine with other countries.
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