African finance ministers want the European Union, International Monetary Fund and World Bank to support a multi-billion debt relief programme for the continent amid the ongoing coronavirus crisis.
“The call for debt relief … should be for all of Africa and should be undertaken in a coordinated and collaborative way,” the UN Economic Commission for Africa (UNECA) said in a statement following a videoconference of African finance ministers on Tuesday (31 March).
It added that “development partners should consider debt relief and forbearance of interest payments over a two- to three-year period for all African countries”.
The coronavirus pandemic may not, yet, have wreaked the same havoc as in Europe and North America – confirmed cases stood at over 5,300 by 31 March, with more than 170 recorded deaths – but most African countries have imposed nationwide lockdown and curfews.
The COVID-19 crisis, accompanied by plummeting oil and commodity prices, and the prospect of a global recession, is already hitting national treasuries.
“There is a big likelihood of a recession,” Bartholomew Armah, head of macroeconomics and governance at UNECA, warned last week.
UNECA has already revised down pan-African economic growth forecast from 3.2% in 2020 to 1.8%, an estimate which Armah now says is ‘conservative’, having been made when the number of coronavirus cases in Africa was low.
In a paper published earlier this month, UNECA warned that African oil exporters face losses of up to US$65 billion, with total fuel export revenues falling to $101 billion this year.
Meanwhile, the continent’s dependence on imported medical and pharmaceutical products, and the fact that only 15 African countries are net food exporters, also poses the risk of inflation.
UNECA estimates that an additional $10.6 billion in healthcare spending will be required across the 54 African nations.
Financing that extra spending and covering the costs of lost trade will require substantial assistance and new investment programmes from the international community, of which the EU is the biggest aid donor and trade partner.
African finance ministers last week called for an immediate emergency economic stimulus worth US$100 billion.
That would include the waiver of all interest payments, estimated at $44 billion for 2020, and the possible extension of the waiver, which ministers say would “provide immediate fiscal space and liquidity to the governments”.
The World Bank and the IMF have already given their endorsement for debt relief and said they will seek to get approval from governments at their Spring Meetings on 16-17 April.
In a joint statement on 25 March, the Bretton Woods institutions also called on the G20 to task them with “identifying the countries with unsustainable debt situations, and to prepare a proposal for comprehensive action by official bilateral creditors to address both the financing and debt relief needs of IDA (International Development Association) countries”.
Analysts believe that more than 30 million jobs are at risk across the continent, particularly in the tourism and airline sectors.
The wish-list of African ministers includes refinancing schemes and guarantee facilities to waive, restructure and provide funding for businesses in those sectors, as well as debt and interest waivers for firms in the agriculture, imports and exports, pharmaceuticals and banking.
They also want a liquidity line so that businesses that are dependent on trade or provide essential goods can continue to function.
$100 billion across 54 countries is small compared to the more than €1 trillion of national rescue packages across the EU, but the G20 meeting and European Council summit – both held by video conference on 26 March – concluded without any mention of an African stimulus programme.
The most obvious candidates to bankroll a new Africa-focused financing programme, along with the World Bank and IMF, include the European Central Bank, which has already announced a €750 billion bond-buying programme, albeit focused on the eurozone, and the European Investment Bank, which has responsibility for public and private sector investment vehicles in Africa.
Of the two, insiders in Brussels say the Luxembourg-based EIB is more likely. The EIB’s leadership already have designs on creating a stand-alone entity focused on African investment.
The fear that revenue losses will lead to the accumulation of unsustainable debts is not a uniquely African concern.
The country worst hit by the coronavirus crisis, Italy, with a debt to GDP ratio of 135%, is among a group of eurozone countries demanding the introduction of jointly issued ‘coronabonds’, in a bid to avoid taking on major new debts alone.
China has also been touted as a possible source of financing by African states, though that could add to the existing geopolitical frictions, with the US blaming the disease on China, which is trying to win friends by offering aid to affected countries.
There are already signs of that in Africa, where Chinese telecoms giant Huawei has been quick to tout its services, offering African governments a ‘temperature screening and monitoring system’ that can be put at airports and ports and at the entrance of buildings, as well as donations of masks, protective gloves and hand disinfectant.
[Edited by Zoran Radosavljevic]