• Sat. May 14th, 2022

Africa needs debt relief to fight COVID-19

After a slow start, COVID-19 has spread increasingly rapidly across Africa, with more than 7,000 confirmed cases and 294 deaths in 45 countries and two territories as of April 7.

Unless the continent urgently receives more aid, the virus will continue to make its deadly and ruthless path through it, with increasingly dire health and economic consequences. As an essential first step, we therefore call for immediate debt relief for African countries to create the fiscal space governments need to respond to the pandemic.

After all, the fight against COVID-19 is more difficult in Africa than in other parts of the world.

Access to quality health care across the continent remains limited, despite recent progress in some countries. One third of Africans cannot wash their hands regularly, because they do not have access to drinking water.

But the main challenge is the availability of resources.

Lack of refrigeration to store perishable foods or medicines makes it difficult for most households to comply with stay-at-home orders. And the livelihoods of millions of workers are at risk because they have limited access to broadband connectivity, telecommuting, or other opportunities to maintain basic incomes.

However, African governments are responding to COVID-19 with determination, including instituting states of emergency, requiring physical distancing, imposing forced quarantines and restricting travel and public gatherings. And private sector companies, civil society groups and grassroots movements are joining the fight in every way they can.

For its part, The African Union, to ensure synergy and minimize duplication, adopted a common continental strategy and established a working group to coordinate the efforts of Member States and partners. The World Health Organization is also showing determination to help African governments.

But the main challenge is the availability of resources.

Africa needs a first $ 100 billion in terms of financial support, as sharp drops in commodity, trade and tourism prices – a direct consequence of the pandemic – are causing government revenues to dry up quickly. Meanwhile, investors’ withdrawal from risky assets has driven up the cost of borrowing in financial markets, limiting viable options for resource mobilization.

Unsurprisingly then, the average budget support plan announced by African governments so far represents a meager 0.8% of GDP, one tenth of the level of advanced economies. And, beyond the short term, the continent’s additional financing needs could reach $ 200 billion.

Of course, international and regional institutions intervene to complement national efforts. The African Development Bank recently issued a $ 3 billion “Fight COVID-19” social bond, while the African Import-Export Bank set up a $ 3 billion credit facility.

What’s more, the G-20 recently called for a coordinated collective response to help the world’s most vulnerable countries, pledged to provide immediate resources on a voluntary basis, and instructed finance ministers and central bank governors to develop a plan of action . International organizations, including the World Bank, the International Monetary Fund, the United States Agency for International Development, the Global Fund and Gavi, the Vaccine Alliance, have all announced programs to support developing countries. And the strong uptake of these programs by African governments illustrates the resource shortages they face.

Despite these efforts, however, the global action and support for Africa to date has not gone far enough. We therefore strongly support the urgent call of the IMF and the World Bank to bilateral debt relief for low income countries. In addition, we believe that it must be accompanied by a parallel treatment of private debt and commercial debt, which now represents a important part of the external debt of many African countries.

The COVID-19 pandemic has revealed the extent of our interdependence, reminding us how intertwined the destinies of all countries are.

Because time is running out, we call for a two-year standstill on all external debt repayments, both interest and principal. During this status quo, the G-20 should task the IMF and the World Bank to undertake a comprehensive debt sustainability assessment and consider further debt restructuring, if necessary, to preserve or restore sustainability. debt.

Debt relief should also extend to middle-income countries who are currently experiencing capital flight and unsustainable debt. Debt sustainability assessments of these economies need to look beyond the debt-to-GDP ratio and also take into account the ratio of debt service payments to government revenue. Several middle-income countries currently spend 20% or more of their income on debt servicing, crowding out much-needed spending on health, education and infrastructure.

Benefiting from immediate debt relief, African governments should focus on protecting vulnerable populations and strengthen social safety nets. And, like other governments, they should also support the private sector, especially small and medium-sized enterprises. This includes paying off the arrears of these companies and ensuring minimal disruption to credit flows, in order to avoid a deeper and more prolonged banking and economic crisis.

Such measures will help to preserve jobs. Without them, Africa could face an unprecedented human and economic catastrophe that could turn into even more costly political and social instability.

The COVID-19 pandemic has revealed the extent of our interdependence, reminding us how intertwined the destinies of all countries are. The global health system is only as strong as its weakest link: Success in tackling the pandemic in any country will be short-lived until every country succeeds.

Beyond immediate responses, the pandemic and its economic fallout therefore highlight the longer-term efforts needed to strengthen Africa’s health systems, diversify its economies and broaden national revenue sources. Achieving these goals is important not only for the continent, but for the whole world.

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