Africa needs debt relief to fight COVID-19, Brookings

17 avril 2020Wathinote Covid-19

Authors: Ngozi Okonjo-Iweala, Brahima Sangafowa Coulibaly, Tidjane Thiam, Donald Kaberuka, Vera Songwe, Strive Masiyiwa, Louise Mushikiwabo, and Cristina Duarte

Affiliated organization: Brookings Institution

Type of publication: Op-Ed

Date of publication: April 9, 2020

Link to original document

After a slow start, COVID-19 has spread increasingly rapidly throughout Africa, with more than 7,000 confirmed cases and 294 deaths across 45 countries and two territories as of April 7. Unless the continent urgently receives more assistance, the virus will continue to cut a deadly and remorseless path across it, with ever grimmer health and economic consequences. As an essential first step, therefore, we call for immediate debt relief for African countries in order to create the fiscal space governments need to respond to the pandemic.

After all, combating COVID-19 is more challenging in Africa than in other parts of the world. Access to quality health care across the continent remains limited, despite some countries’ recent progress. One-third of Africans cannot wash their hands regularly, because they lack access to clean water. Lack of refrigeration to store perishable foods or medicines makes it hard for most households to comply with stay-at-home orders. And many millions of workers’ livelihoods are in jeopardy because they have limited access to broadband connectivity, telework, or other opportunities to maintain basic incomes.

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

But the key challenge is the availability of resources. Africa needs an initial $100 billion in financial support, because sharp declines in commodity prices, trade, and tourism a direct result of the pandemic are causing government revenues to dry up fast. Meanwhile, investor pullback from risky assets has pushed up the cost of borrowing in financial markets, limiting viable options for resource mobilization.

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

Unsurprisingly, therefore, the average fiscal support package announced by African governments so far amounts to a meager 0.8% of GDP, one-tenth the level in advanced economies. And, beyond the near term, the continent’s additional financing needs could rise to $200 billion.

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

These efforts notwithstanding, however, global action and support for Africa to date have not gone far enough. We therefore strongly support the urgent call by the IMF and the World Bank for bilateral debt relief for low-income countries. Because time is of the essence, we call for a two-year standstill on all external debt repayments, both interest and principal.

Africa needs an initial $100 billion in financial support, because sharp declines in commodity prices, trade, and tourism a direct result of the pandemic are causing government revenues to dry up fast

With the benefit of immediate debt relief, African governments should focus on protecting vulnerable populations and bolstering social safety nets. And, like governments elsewhere, they should also support the private sector, especially small and medium-size enterprises. That includes paying these firms’ arrears, and ensuring minimal disruption to the flow of credit, in order to avoid a deeper and more prolonged banking and economic crisis.

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

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Africa needs debt relief to fight COVID-19, Brookings

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