But today, I'm delighted to welcome Professor Chris Adam,
professor of Development Economics and a senior Oxford fellow on the Oxford Martin programme on African government governance.
Now, Chris, also happily for us, is an associate editor of the Oxford Review of Economic Policy.
And as of next year, we're delighted to say we'll be stepping into the shoes of the managing editor.
Now, this is no slight on the existing managing editor who has tried to do his best.
But let me just say we're all very much looking forward to Chris taking over.
Yesterday, David noted that many countries simply don't have the fiscal firepower to throw trillions at the pandemic.
And many of those countries without that firepower and are in sub-Saharan Africa.
And what are they to do?
Well, I'm hoping that today we'll get some sense of the policy landscape and the set of options for these countries where actually,
if anything, the severity of the pandemic hasn't been as obviously as severe yet as it has been in some other countries.
But where I think at least speaking personally, it seems to me the risks could be all the more severe.
So hopefully Chris will take us through some of those policy options in low income countries,
in particular in sub-Saharan Africa or at least in a representative country. And Chris,
if you could spend fifteen or twenty minutes sharing the ideas in your paper in the Oxford Review will then turn to Q&A and those listening in,
you can ask questions at the bottom right of your screen and you can upvote questions you like.
And as you've seen in previous sessions, at a certain point, I can't ignore a question that's been upvoted enough.
So do ask questions. So, Chris, the floor is yours. Thank you.
Well, thank you very much. Come on. And thank you for the invitation to speak in this series this afternoon.
Made a couple of points, which I think I will use as my jumping off points for my opening remarks.
The first is that what I'm going to talk about today follows on to some quite substantial degree from the presentation that
David Vine's made yesterday and the paper that he and Warwick McKibbin have written about global fiscal coordination.
In a sense, what I'm going to talk about is a slightly deeper dive into the analytics of of one group of countries,
those that don't have the fiscal firepower that city advanced economies might have.
And I want to talk through some work we've done on trying to think through the
structure of the the Koban 19 shock to sub-Saharan Africa and some policy options.
The second point I want to pick up on the coverage started with this is the observation that in a sense,
global attention has been rather naturally on on the global hotspots, the United States, Europe, increasingly Latin America.
And that in some sense, there's been much less attention on sub-Saharan Africa and the low income countries, sub-Saharan African member level.
In a very direct sense. This is this is understandable.
We're talking about a region of the world with a population of about people with at present a relatively low pace continent,
really very low recorded fatality rate.
The latest numbers might suggest something in the region, 15 thousand covered related deaths so far.
We need to be very, very careful of those numbers here. I'll come back to that in a moment.
But to some extent, for the low income countries of sub-Saharan Africa, the challenges are all indirect,
that even if we were in a situation where for a variety of epidemiological reasons,
the pandemic itself had no direct or very limited direct effect on the countries in the continent,
or that's locked on measures of social distancing measures or other public health interventions were supremely effective.
That would not insulate the economy from the indirect effects of the pandemic.
And what I want to argue in this paper and what we try and show is that it is the indirect spill-over effects from the global
economy that are likely to present the biggest challenge and the biggest threat to low income countries of sub-Saharan Africa.
And without being overdramatic,
it's probably fair to say that what's at stake here is essentially 25 years plus of progress in terms of human development on the continent.
That's whilst there's an awful lot of variety from across countries, there are countries still very much mired in conflict.
But compared to, say, the 1980s or early 90s, the economies of sub-Saharan Africa had a really impressive quarter of a century,
30 years of steady economic progress, some very high and sustained rates of growth, some very significant reductions in in direct measures of poverty.
But more broadly, in terms of other measures in development, inclusive measures of development,
there has been a lot of registered progress amongst the low income countries of sub-Saharan Africa.
A lot of this is at stake, at risk. And what I want to do then in my next 10 minutes or so is to talk through some of the key analytical
elements that are relevant here and then use that as a jumping off point to think about policy options,
both national and international.
So I'm going to share a few slides, really just to try and highlight a few of the key points that I want to make in a few pictures and stress,
one or two key analytical points, the commodity paper, and then I'll stop showing slides, more return to more discussion.
So if you give me one second, I will share my screen.
If you can manage it Crick's in one second, you're doing well, certainly better than David Manege yesterday.
Well, let's see. Let's see how. OK, can you confirm that you can see this coming?
Global cases in population? OK, so this is my starting point and two observations.
This. This is looking at the first three or four months of the pandemic.
The solid lines are cases.
And I've highlighted the fact that globally the daily caseload in sub-Saharan Africa is extremely low relative to other regions of the world.
The dock line is Europe is North America. The bars come from this fantastic evidence that Bartnick school team have collected,
which is looking at the severity of public policy responses locked on things.
And they the dissonance here is that despite this low caseload or maybe it's there is a causal link here.
The. Intensity of Lockton in sub-Saharan Africa has been really substantial.
And I'll say a word or two about what what lockdown might mean and the implications of this.
In a moment. But the.
Most countries in sub-Saharan Africa implemented some form of lockdown and in many cases an extremely aggressive form of lockdown sustained for.
50, 60, 70 days. And in some cases longer. And at least by the end of May, early June,
these the eyes locked on measures seemed to be associated with relatively low caseload and relatively low direct coverage related mortality.
If I if I go to my next slide. However, this is taken from the Financial Times two days ago.
And what we're beginning to see is a steady creeping up in the proportion of daily deaths by region.
So somewhere in the region of five percent of global deaths are accounted for.
In sub-Saharan Africa at the moment, this is this is rising, rising quite steadily.
We've heard a number of quite worrying reports coming out of South Africa.
One of the few countries that is able to measure excess deaths and the excess death numbers in South Africa are beginning to look rather worrying.
This suggests that the direct effects of the pandemic may well still be further down the road.
We may not be completely confident that that the lockdown measures have done much more than than push the risk further down the road.
But before I move on to the economic side of it. One important issue that that emerges from the epidemiological and public health evidence is that,
as in many other cases, the big risks are the indirect consequences.
Direct mortality from Coalwood may be low, and that may reflect the demographics.
This is a young, a very young continent, but the indirect effects as a result of reduced health seeking behaviour,
the the paring back of other forms of health intervention may actually be very large and very serious.
Already we know that more than half the countries in sub-Saharan Africa have halted immunisation programmes.
That's a very worrying sign forward in terms of thinking about the difference.
But as I said at the beginning, even if this mortality rate is kept low and managed,
the economic effects of the pandemic are likely to be extremely severe for the continent.
And the way I like to think about this, this is that for the economies of sub-Saharan Africa in general,
although there may be quite a lot of variation across countries, we can come back to that later.
This is a both a right hook and a left hook.
It's a domestic supply shock in the sense that the imposition of locked on measures, withdrawals, labour from the economy.
It leads to closure of key sectors in both the tradable economy and the domestic economy.
It reduces the efficiency of operations, the efficiency or increases the cost of operations.
And that is a classic domestic shock, very similar to that experienced in in other countries around the world.
But the bigger part of of the challenge for low income countries is the spill-over from the global recession.
So it's in global demand shock. And the key point that I would stress here is that there may be a hit to output to the productive side of the economy.
But the big welfare costs come through the hit to the consumption or demand side of the economy.
The small, open economies of sub-Saharan Africa tend to operate with very large trade deficits.
These trade deficits are financed partly through debt, but very importantly through remittances,
through the inflow of foreign direct investment and other other financial flows
that allow consumption to be significantly higher than domestic production.
The global demand shock for low income countries is essentially can be thought of as a it's an enforced closure of the balance of trade.
So export earnings in many cases have fallen very dramatically,
either for natural resource exporting economies, oil prices, mineral prices have dropped very substantially.
The exception, of course, in gold. But for many other countries, think of those countries in East Africa,
the reduction of travel and tourism that is removing a very substantial chunk from export earnings.
The second major component is the slowdown in remittances.
And many would argue that this is has not.
The slowdown has only started as migrants are essentially trying to absorb some of the risk as they
themselves may be protected by furlough schemes or other forms of support in the in the remitting countries.
And the likelihood is that remittance, the decline in remittances that we've already seen will will accelerate over the next six to nine months.
It's important to remember, for many low income countries,
remittances now account for substantially more in terms of foreign flows than than official aid funds.
Then on the capital accounts.
There's been a sudden stop, a freezing of private capital flows as as investors seek the security of reinvesting back in either.
They require the liquidity or seek the security of reinvesting back in the US and FDI flows,
including from major FDI originating countries, including China, have slowed very, very substantially.
So this is the the nature of the shock.
And what what we do in this paper is some try and calibrate that shock for a representative of low income country.
The numbers that we use actually come from from Uganda.
And in many respects, Uganda is is archetypical, although clearly there's a lot of variation amongst these these central numbers.
And what we've done is shown in this in this picture, the dotted line is, is the pre Kovar trend per capita growth rate growth rate of consumption.
And what we've done is, is using data and estimates, tried to calibrate the impact of the shock.
And here I've distinguish between the direct locked on effects, which are initially very severe,
but take away quite quickly the second round domestic effects and then the global spill-over effects.
Faced with this kind of challenge, the question is what? What are the policy options?
And it's worth just drawing your attention to to the scale of these these kind of contractions.
The squeeze to consumption could be in the order of 20, 25 percent annualised in the current year and only recovering within four or five
years just from the current evidence we have on the severity of the global shock.
The key challenge for for low income countries is this.
That the mantra of we will do whatever it takes is a highly constrained mantra in low income countries and adjustment generally to external shocks,
to to falls in commodity prices, to natural disasters, to any form of of external shock.
Is this one that you hear often finance if you can adjust, if you must, and the finance if you can option is the bit that is extremely constrained.
Anybody in the audience today who listened to David Vine's talk yesterday will have heard him refer to some numbers that came out of the IMF.
It suggests that amongst the major economies of the world,
somewhere in the region of nine to 10 trillion dollars has been put forward either in direct or contingent financing to smooth adjustment,
nine to 10 trillion dollars. That is getting on to 10 percent of global GDP.
So it's an enormous sum. Low income countries do not have those resources.
They have very limited foreign exchange reserves.
They are not part of these these deep and substantial central bank swap lines that that provide short term liquidity as required.
They have very limited fiscal space.
They recent history the last five years as commodity prices have fallen quite sharply from their peaks in a roundabout.
2015 has not been accompanied by an aggressive fiscal adjustment in most cases.
And so the scope for domestic fiscal adjustment is highly constrained.
And I. Let me just sort of before I say a little bit more about options, I give you the conclusion of what we're looking at from this paper,
that if you think about the kind of options that are feasible, that don't be too excessive, self-imposed damage.
And I'll mention that in just a moment. We estimate from this this analysis that low income countries in sub-Saharan Africa might need an
additional 40 to 50 billion dollars of support in terms of balance of payments or on budget support,
official financing. We think of this as official development assistance, 40 to 50 billion dollars per annum over the next couple of years.
That would entail about twice the current spending levels.
It's extremely large in historical terms. It's not unprecedented. And that would be my closing remark.
But it's also very small relative to the global scale. Forty to fifty billion is a small fraction of 10 trillion.
But as I say, there's an awful lot at stake here. So let me say a word or two about what we do and then I will stop sharing my slides.
So what this paper does is it looks at a set of alternative fiscal,
a macro economic and fiscal adjustments that are either blended with that rely entirely on domestic financing
options or blended with various amounts of overseas development or official development assistance.
Okay. And what they. Allow us to do is to try site alternative adjustment parts,
ways in which we might imagine the economy adjusting in response to the fiscal measures and the path of the shock that I originally described.
And the key thing, which is my my ultimate point here, is that without external financing, there are clearly fiscal combinations that are feasible,
but they are very costly and they typically involve a combination of expenditure cuts,
investment cutbacks that really undermine the growth potential, the private sector growth potential over the medium term.
So whereas one might get some improvement in some moderation of the shock in the short run,
the consequences this Greenline shows is a much more attenuated recovery of the economy.
This simply being because essentially the short run consumption gains are paid for by cannibalising the medium term growth potential.
That is supported by productive public expenditures.
Once you start to bring in external financing, then that recovery path is somewhat moderated and may be further moderated as we detail in the paper.
If if this financing is in some sense contingent on other forms of domestic fiscal reform,
the final point on this slide that I want to make is simply that.
These numbers that I quoted earlier, the doubling of Odelay.
May make the fiscal adjustment feasible. It doesn't make it any less uncomfortable.
That's the amount of resources required to fully insure consumption would be twice to two and a half times the sum that I originally quoted.
Probably way beyond anything that is feasible, politically feasible.
So let me just conclude with this final observation.
This line is the path of development assistance since the 1960s and the red dotted line is what our
projections would suggest would be required from the levels currently prevailing just before the pandemic.
This is a very substantial increase. This red dotted line.
But I just draw your attention to one fact that it's a similar order of magnitude as the donors, the dock donors,
these are the traditional essentially Western governments provided in financing
to finance the highly indebted Poor Countries initiative between 1998 and 2005.
So it's not unprecedented.
We're clearly in a different political configuration, but it helps us to scale the level of adjustment that might be required.
So let me stop at that point and return to the screen that to the gives you a sense of both the positive.
And we can talk a little bit more about the normative policy options that we described you described.
Let me leave it at that point. Cameron. Thanks, Chris. That was it was really a clear exposition of the issues.
And I've learnt some something from it. I mean, I was really struck by your statement to stop.
What is at stake is twenty five years of progress on development. It's a big deal.
And then the core conclusion that it's these indirect effects rather than the direct effects that may well come further down the road.
But the indirect effects, the big ones are they're important conclusions because it means as you're going through,
as you can kind of do it all together in a way, it doesn't necessarily matter how.
Well, domestically African nations perform in their health care in their response, then a pandemic.
If the rest of the world is suffering a demand shock and you know, it's going to be it's it's going to be problematic for subsaharan Africa as well.
That's a very important conclusion. Now, I've just got I've got a couple of questions before I turn to those that are coming in.
I take the point that without external financing, it's going to be very challenging to make progress here.
How do we make that external financing happen in a sensible way?
I mean, I had this discussion with David yesterday.
Many of the questions were about the scale of the challenge, how to how do we deliver what's required.
And David's answer was more or less where we're not. We just have to do as much as we possibly can.
But I wonder if there is an a more optimistic angle here.
You said that there's maybe 50 or 60 billion. It's not 10 trillion that is required.
David, you were saying we are not going to get a trillion increase in capitalisation or SDR is the IMF.
You might get a few hundred billion. But even that was rejected. But we're not even talking about a few hundred billion.
Is that is that right? I got that right. Is this feasible?
Could actually happen that we spare the poor countries the worst of the impacts if we were to be generous about it or sensible about it?
I think this point about scale does does matter. And you're right about the failed SDR issue in March of this year.
That may not be completely off the table. The international organisations, the funds and its membership may be able to come back to that next year.
There may be more room. It depends on a lot of factors, including the domestic politics.
The United States, obviously. But. This is this is operated in the past with a number of governments, particularly European governments,
that they have essentially through a generalised SDR issue from the fund.
They have repurposed their share of the SDR allocation in terms of.
Well, this was it was reprogrammed towards debt relief in the not some 1998, 2005 period by a number of countries.
And there's plenty of discussion about that as an option. It's it is a difficult time to be talking about.
Bilateral donor assistance. There's no question about that, some.
We know only too well from our own country that the appetite's is somewhat constrained.
There is the kind of aid and development rhetoric is highly timestep at present.
And in particular, the kind of support that's required here, which is.
Roughly speaking, unconditional balance of payments, support.
It's basically providing the resources to allow governments to manage the fiscal adjustment.
Mozer. I am. So I'm not sure how far I deviate from from David's view that this is a this is a difficult time to really push the bilateral donors.
I think there's been quite a lot of action from the International Monetary Fund.
Within it, within the constraints that it operates, which are determined by, quote, various trust funds.
We've seen a lot of rapid response by the funds, more rapid than I think I've ever seen before.
Across a large number of countries. But it's still a modest scale.
And so the question is whether there's an appetite within the regional development funds,
the World Bank and the regional development banks to to increase their borrowing on
the markets and on lending in this more traditional balance of payments support mode.
Whether it's an opportunity for. Non-traditional, that's called non-traditional donors to move more decisively funds into the space.
I don't know enough about what's happening, for example, in China and the what the official position in China would be.
It's a. If you look at the last few years, it would be capital from China, mainly FDI, but also comfortable.
And scope for perhaps this. We'll pick this up later.
There may be scope for increased finance, for reinvestment,
for the kind of green finance that then releases resources to the more traditional adjustment mechanism.
The other point, which we might come back to later is, is whether there's scope, whether it kind of crisis creates scope for.
Effective domestic adjustment. One of the features,
one of the disappointing features over the last 20 odd years is the failure to really radically improve domestic resource mobilisation.
As part of this adjustment process and there's I think there's quite a lot of
discussion about whether this is an opportunity to essentially who off the trick
of widening the tax base and lowering the marginal rates in a way that that allows
domestic resources to be mobilised more aggressively and more efficiently.
Yeah, it's probably not sensible to go into it now, but I was struck by your Slide seven, where you are already a plus reform.
It's about the baseline and it's better than nothing from day one.
It struck me that reform it's hard not to conclude that reform is a free lunch there,
but let's perhaps leave that aside for the for the moment, because there's a lot of questions about debt relief, which you just mentioned.
No. Where's Gordon Brown when you need him? Might be one way of paraphrasing Helen Morris's question.
And could could we. Could you imagine?
Okay. Bilateral increases in bilateral aid might be difficult because every country is feeling it.
But could you imagine a coordinated effort at debt relief?
How might that come about? Could we were discussing earlier in this series,
could a debt for nature or a debt for climate or debt for something swap make it more palatable, increase the scale of debt relief?
Or is now not the time to be thinking about conditionalities and deals?
Let's just increase the fiscal space however we can. What are your thoughts there?
No, I think this is this is interesting. I know the African Development Bank had been exploring sort of that for climate type swaps.
You may even be involved in that in that discussion.
One of the challenges is that if you look to the traditional donors, to many of the low income countries,
traditional creditors, official creditors have already written off most of the debt.
That's where we're in a environment where the composition of a borrowing over the last five to seven years,
maybe longer, has changed rather radically since the end of the heroic period.
So if we were having this conversation 20 years ago, it would be about what would the Paris Club be able to do?
To what extent can the Paris Club coordinate the relatively small number of multilateral and
bilateral donors into a coordinated debt relief for new financing rescheduling package?
The Paris club's capacity to coordinate has been significantly reduced,
partly because more of the an increasing share of debt is private debt issued on bond markets and an increasing share from Paris Club creditors.
And so that doesn't mean that there isn't scope for mutually beneficial debt restructuring some.
And it's going to be in creditors interests as much as the debtor's interest to to think about restructuring.
But it's a harder coordination problem than it might have been in the past.
I think the initiatives initially raised by the G20 on the debt standstill arrangements,
I think to extent they are more relevant to emerging market countries where the share of non concessional and private debt is higher,
and so that there there's a lot of productive work going on there.
Some of that is relevant to some of the countries in sub-Saharan Africa.
There are a number of particularly the kind of hydrocarbon based economies that have higher levels of market debt.
And there's there's scope for benefiting partly from the debt standstill arrangements that's been proposed by the G20.
The key challenge, I guess, is how do you bring China as a major creditor into a debt restructuring discussion?
What what's the forum? How is that facilitated?
To what extent is there the appetite in the G7 and the G20 to facilitate that in terms of mechanisms?
I suppose my initial starting point is that if ever there was a time for a kind of unconditional support.
This would be it. But if some degree of conditionality where were required,
there's enough a combination of conditionality and fungibility of financing still creates the scope for for gains on both sides.
So the debt for climate swap. Approach, given that there is that's.
There's enough leverage on me. The climate investment side. I'm not sure the scale of these instruments,
to what extent you can use this as a mechanism to really get substantial resources into into the lowest income countries.
But I think that's an area that's I don't know enough about, but I think it's one to consider pursuing.
So just about and then you said that, you know, if ever there is a time for unconditional support,
this is it's an Shivani has asked the question similarly, you know,
just from an ethical moral standpoint, don't creditor nations or at least the developed nations,
if not also China, has its own set of developing development issues to think through.
But the rich nations at least have a moral responsibility here.
It is a crisis. There are people dying and we are able to help.
Should we not? I think, you know, I think it's not difficult to make the moral argument that this is a global crisis.
That's. It's not this is not one that says it's a crisis that doesn't discriminate, it clearly does discriminate.
And part of the argument here is the discrimination may be, despite the best actions on the public health front,
that just the spill-over effects alone are so large to make it a make the moral argument an important one.
You could you could argue this on a on a self-interested basis that some.
Just if you think of the, for example, European concerns about migration and what it's going on, what are the big drivers of migration?
It's a combination of conflict, persecution and economic hardship.
And if.
If you wanted to develop a purely self-interested argument, it would it would be based around concerns over migration, concerns over future markets.
This is the youngest and potentially fastest growing part of the world.
This is part of the rhetoric of the global written strategy.
That's the new FCO. Difford Mergers is articulating that these are vast growth markets.
You could you could make it on a purely self-interested basis.
But the moral case and the moral cost benefit,
I think is the cost benefit argument is is going to reinforce any moral position we want to take on this.
McCain. So there's a moral case, but there's a case from self-interest as well.
Let's pursue both, I suppose, is that if we go back to some of the points David was making yesterday about, you know,
the Keynesian demand trap and just restoring confidence in the economy, Nelvis,
if if your demand shock is external to your economy, then there's not a lot you can do.
But to the extent that the demand shocks that domestic.
Are there not things that these countries or countries everywhere, not just in sub-Saharan Africa,
can can do to re to get the economy restarted without necessarily having to pump money into the economy?
Are there ways of. I have some in mind, you know, policies that can create confidence with investors confidence that there will be returns,
confidence that you can sink capital, create jobs, and actually that will be rewarded.
That don't require trillions or hundreds or even tens of billions to to get going.
You use you simply create the confidence because you owe the government.
Yes, I think that's I think that's both those part of your statement are correct,
that one of the challenges of the of the small open economy is that the demand shocks external,
that it's some it's not Keynesian in that in that sense, it's a it's a it's the problem.
Like being a price taker or global demand take or so the kind of.
Domestic fiscal stimulus. On the demand side is a difficult to do and B, likely to be relatively relatively weak for a whole variety of reasons,
including the fact that some some of the obvious ways in which you would do
that require are based on an assumption about the scale of the formal economy.
These are there may be some scope for simple demand.
Income transfers and other forms of social protection that provide a bit of stimulus.
But I suppose this could your second point goes back to your appropriate scepticism about the free lunch plot that I showed,
that that that is sort of giving a sense of what what might be achieved under what we're looking at with various forms of fiscal reform.
But there's a there is a whole agenda that in a sense pushes back against.
Kind of drift towards economic nationalism that is focussed on, as you say, and confidence.
Both. It's confidence towards domestic investors, but also towards external investors.
I think one of the challenges, though, is, is that some.
Is the aggregate nature of the shock that some even.
Investing heavily in confidence in trying to get some foreign investment in.
Over you. In whatever sectors you may be thinking about.
If the volume of investable funds is contracting globally, then that's that's always going to be quite difficult.
But there's clearly an agenda of policy measures that probably are are measures that you'd want to see taken in any case,
but the current circumstance may raise at least the short run returns to this form of improving the regulatory environment, improving kind of.
Skills and training and. Kind of the market enabling reforms, which I think is what you're hinting at.
Maybe you've got something more specific. Well, no, I didn't have those in mind.
And I'm actually on that point.
There's a there's a comment I see from Mark Stanley Price about how much might be gained by tackling corruption effectively.
And I guess that's true whether in sub-Saharan Africa or anywhere else in the world, for that matter.
I also had in mind sets of policy instruments that guarantee or nearly guarantee returns from investments in
in key pieces of future oriented infrastructure that makes them attractive to institutional investors now.
And maybe again, as you say, that because these countries, in many instances, price takers,
for want of a better phrase, the impact of domestic confidence still isn't going to be big enough.
Often what really matters is, is global confidence in the global economic system.
But, yeah, so so the policies that guarantee returns in the future, because actually as a government or as a central bank,
you can particular government, you can stand behind those returns.
But you have to do that in a sense that that is that's so that the people that agenda in the sense that that I started by mentioned that there's.
Quite a wide range of countries in sub-Saharan Africa that have posted very impressive returns.
Measurement issues notwithstanding, if you've read this week's economist on the quality of GDP numbers in certain countries.
But this agenda, I think of thinking about policy reforms that that's helped to attract key investors,
key bits of infrastructure, the kind of market enabling public investments,
and then smart technologies and green technologies and digital connectivity that
that agenda in the is was quite well rooted in a fairly large number of countries.
And part of my pessimistic adjustment path for domestic adjustment through domestic resources only is a reflection of what happens if you have
to essentially cannibalise that those sorts of investments in order to try and support private consumption during the depths of the recession.
So they pay off to external finances, in large part the protection of that that agenda,
both the resource intensive part of that agenda, the investment, but also be the policy agenda.
I think you're I think you're muted. Come on. Thanks, Chris.
First time for Alexi's managed to narrowly avoid that on a number of occasions.
Thank you for picking me up. I wanted to move now to a set of issues that frequently has come up.
I say not just today, but in previous discussions as well about the second wave, about anticipating and planning and managing around that,
and also about vaccines and how we make sure that everybody has access to them.
And what are the effects are all that could be of a vaccine on various country economies.
And so in particular is a question from Shivani.
Again, I think on your shoes, should we be pumping money now to a recovery when there could be a second wave around the corner?
And I guess Shravani probably also means, you know, in some sense, a major first wave in sub-Saharan African economies.
And shouldn't the aim just be to keep people alive and afloat until we get this vaccine developed?
Well, I suppose. In a sense, what?
What do locked on and distancing and other measures do is that they.
One level they push. Versus spike out into the future.
And one view is that they push it far enough that that vaccine is available
technically and presumably also logistically in terms of a genuine availability.
And so you could say your strategy is is provide sufficient sort of consumption support,
income support during that period, that transitional period in anticipation of.
The recovery of the vaccine, the availability of vaccine and distribution of vaccine.
I on the point about whether. That's an argument for not if I understood the question correctly, for.
Not investing today is that isn't the question.
I think it was about.
You're not pushing, not stimulating the economy to the point where actually we end up with further infections and further damage.
We just want to keep people alive and and wait until we get a vaccine.
And so my understanding is that we are living that too rapid.
A recovery, in a sense, raises the risk of.
Yeah, right, right, right. Well. That's a yes and no.
One thing that is quite interesting in in economies where there's a large informal sector where economic activity is in some sense very intimate.
It's not clear to them not whether whether locked on social distancing measures are particularly effective, extreme, locked on.
Definitely in in those areas where where there is density.
And the evidence coming out of the evidence from Kenya is really very interesting in terms of what seems to be happening as
a result of a locked on policies in areas that you might have thought were highly vulnerable to the spread of infection.
So, Chris, I'm sorry to interrupt you there.
I mean, you weren't saying the lockdown on social distancing on effective and shouldn't shouldn't be policy.
What are you. Oh, wow. Is that what you're kind of driving at? Maybe we should.
I'm saying that it's it's not clear. They are very costly policies in terms of the disruption.
And I think we've got a very unclear view as yet on their on their efficacy.
OK. So it's sort of suppresses benefit question. So I think that that remains of a very difficult balance to strike.
And. But let's try and get back to the.
The kind of core plains. We're not really talking about stimulating economies here, we're we're talking about mitigating the negative of that.
That's an even even if as, for example, is the case in Uganda, the lockdown is almost completely removed.
That's only removing one part of the shot that we're looking at.
It's a lot of what I'm talking about here is how to how to deal with the external element of the shock.
And in a sense, it doesn't really matter what's happening on the public health side.
That external spill-over effect is still hugely damaging to the lives and livelihoods of present and future.
But the only other point I'd make on this is that it's where I started that that it may well be that
the biggest threat on the health and welfare side of the ledger comes from the indirect effects.
The fact that other aspects of public expenditure have been cut back.
These immunisation programmes are being scaled back, that people are not seeking health treatment on malaria or on non-communicable diseases.
And that's. The combination of that and reduction in schooling and the all the associated effects.
Indirect effects are the ones that are going to get opened. Really damage the recovery process.
And if that is the case, then I can see no argument why you wouldn't even if you anticipated the wave increasing or a second wave,
why you wouldn't look to try and minimise the short running point.
Okay. Can I. Whereas starting to run out of time, but I'd like to get your insights actually might just add that you've I think indirectly,
at least partially answered John Rosenfeld's Fields' question in your or your last response about the the weather.
Macroeconomic adjustments are much of a function of health care responses on Orch and at least as far as these indirect effects go.
You're saying it's related, but actually indirect effects of their respective how?
Well, you have a response.
But I'd like to move to a separate issue around currencies and monetary questions now as couple of questions here that kind of can be joined together.
Tony Cole has asked a question about the US dollar as a base currency.
And if we moved away from that, perhaps adopting some of the currency or unitary currency, could could that help?
John Rosen field is asks. Are there bright areas of investment in sub-Saharan Africa?
Are there regional differences here? Are there reasons for optimism? And I'd like to put those two points together, ask my own question, if I may.
The states are nation states ability to respond.
Here is presumably partly a function of how under control or otherwise inflation is,
because if inflation is under control and inflationary expectations are damped,
then there's a certain amount of printing of money that you can engage with and monetary financing of of deficits that that enables you to respond.
And I'm no expert on African countries, but I'm well aware that they're not all the same as what some countries have more fiscal space,
more challenges with inflation than others.
And perhaps you could give us a sense in your answer both that this kind of macro level, do we shift away from the U.S. dollar?
But also at the more regional nation state level, are there other areas to think?
Well, actually, you know, here's a half dozen countries. They might be in sub-Saharan Africa, but the macroeconomic arrangements are not too shabby.
Inflation is under control if they've got some space here to go and print.
What do you think? Well, yes, let me start in reverse order with this sort of fiscal space and capacity for a kind of.
What what you might call the unconventional monetary policy.
Elsewhere, there is there is some scope.
For that, but. And if I were to look at countries that have kind of established a degree of kind of.
Fiscal control and. Macroeconomic management and on which you could build that kind of response in some sense,
this is this has always been the glittering prise in monetary policy performance, create the space to respond to real shocks when real shocks hit.
And I would I could think of maybe four or five key countries.
That may well be more that that that option is there.
Ghana, Ethiopia, Rwanda, Kenya. Hello, Uganda, possibly Tanzania.
In that group as well.
There's also this really interesting group in West Africa that operate the CFA, Frank, that is underpinned by the French treasury.
If if ever there was an opportunity for. That's that underwriting guaranteed to be put to good use.
It would be in the in the franc zone at the moment.
Interestingly, it's only two or three months ago that the franc zone took a very decisive move to try and weaken that way.
But if you were looking for an opportunity to take advantage of that institutional arrangement,
there's 14 countries in western central Africa that have that option.
That's France. Can I just I just dive in a little bit further on that.
Who who would need to take action to make that happen, though?
That would require a coordinated view within the zone,
ie between the two central banks representing the countries of western central Africa and to some extent,
the government of France to gently turn a blind eye on these countries, enjoy full convertibility and in a sense,
the option of monetary financing if their overdraught or the French treasury is allowed to influence.
And that's given that the French zone as a whole is about the size of a medium sized de Pottermore in France.
That's not a big thing to do. And that may well be happening, but that's not this.
There's an interesting opportunity there to start looking for those countries.
As I said, I think there are there are other countries where this is and there's some scope, but these are not terribly highly monetised economies.
You don't have large banking systems.
You don't have huge penetration that allows the leverage from monetary financing to be particularly significant to other points.
I do think there are important potential growth areas.
As with elsewhere in the world, this is. This crisis has given a huge kick to digital technologies and kind of teleworking.
Countries like Kenya, Rwanda, to a large extent, places that have time zone advantage.
I have got well educated workforces, especially well-educated English speaking workforces,
are capturing quite a bit of the market in the back office services.
And that kind of it's not highly labour intensive, but it's a growth area.
Regional trade is the other. The other issue, I think one of the one of the consequences of the global.
Demand shock is that creates the incentives for increased intraregional trade.
And that will start to build on quite heavy investment,
both in the policy and the physical infrastructure that has supported quite substantial growth in intraregional trade over the last decade.
I think that's going to enjoy. Philip. I think we will see a substitution away from global imports into regional imports.
So there is a kind of a regional Keynesian opportunity there.
Even if we're seeing a decline in demand now, we're very nearly out of time.
A minute left. Vishna has been patiently waiting.
Having asked the first question of the whole session, and I've left it right till the end.
So apologies issued. Thank you for your patience. But he's asked what the paradigm environmental economics be redrawn.
Now, I'm going to interpret that a little bit for you.
Chris, I'm going to suggest that what he's interested in, I hope I'm right about this, is whether this is an opportunity.
The pandemic is an opportunity for the countries of sub-Saharan Africa to think a little bit about their development model, their economic model,
and look perhaps at some of the mistakes that we have made in richer economies and to rethink the paradigm,
as it were, and to build back better go back or to build forward differently and more Greenly, perhaps.
Obviously, we have a paper main co-authors, I and my co-authors in the issue on this issue.
I'm wondering about your thoughts. How would apply to the developing context?
Well, I think I think there are opportunities. And in a sense, this this picks up some.
Strands that we're seeing already in the in all the debate around resilient infrastructure investments and climates,
climate responsive public investment programmes.
And I think that's going to accelerate. There are clearly some technological leapfrogging areas of digital technology, mobile banking.
Different different approaches to the financial sector development.
I think I think one of the really big areas is the thing that I mentioned on the previous question.
I think we may see this as generating a substantial change in patterns of trade from extra regional or extra continental
trade with with traditional metropolitan commodities for for manufactured goods to greater incentives for domestic trade.
And that as markets grow, as the continent becomes more urbanised, that's a whole nother set of issues.
But. The rapid growth and the growth of markets means the investment in the infrastructure of trade.
I think intraregional trade is probably going to be an important part of the recovery strategy.
Does that amount to a change in paradigm? Sure. But I think that may be an important part of the recovery.
Great. Well, thank you very much, Chris. And that's all we've got time for in terms of the substance of the discussion today.
This particular issue of the Oxford Review of Economic Policy will be published, I think, within the next week, if not even sooner.
Some of the articles are up online already as advance articles. I've just asked myself a question in the question box.
I'm not sure if anybody else can see that, but it's on on at the office website.
You, P and Chris and others papers will be fully published within, as I say, within a week or so.
The existing papers up there, including authors including Gordon Brown, Joe Stiglitz and various various others, actually is a very good issue.
We have further talks building on this issue. Coming up on the 16th of September, Rio Del Rio and Shannon and Don Farmer.
We'll be talking about the impact of supply and demand shocks on industry and occupations.
And on the 13th of October. Marianna Masakazu. We'll be talking about the big failure of small government and we hope as well in due course sometime
within September or October to have you on the set from the Bank of England discussing her paper.
But for now and indeed for the next month. That's it from us at the Oxford Martin School, the Smith School in the Oxford era of economic policy.
Thank you for tuning in.
And please come back after a well deserved, I hope, holiday, certainly on our accounts, both deserved on the 16th of September.
Thank you very much.