Why African countries need to ask for debt relief over Coronavirus

As most Wealthy countries in lockdown to curb a Coronavirus pandemic also Africa countries are not left out.

Even before the coronavirus outbreak set the stage for a global recession, African governments were feeling the strain. Over the last decade, Africa’s public debt has increased by half to about 60% of the continent’s gross domestic product.

Seven African countries were in debt distress as of October, according to the IMF, with nine more at high risk. For some, the strain could become too much.

Africa’s biggest oil producer, Nigeria, has slashed nearly $5 billion from its budget and devalued its currency. It factored in an oil price of $57 a barrel for 2020 budget but is selling crude for as little as $28. Other oil producers such as Angola, Gabon, Congo Republic and Chad are also hurting.

Former minister of finance, Ngozi Okonjo-Iweala, economic expert who played a huge role in getting Nigeria an $18 billion debt-relief as minister of finance, stated a debt relief will aid in getting resources to tackle the spread of Coronavirus.

Okonjo-Iweala has advised Nigeria and other African countries to quickly pressure the G7 and G20 for debt-relief in order to deal with the economic and health issues arising from the novel Coronavirus.

The Nigerian-born economist and international development expert averred that the money owed by some African countries can be channeled towards dealing with Coronavirus.

She said, Africa countries have the World Bank that has set aside $14 billion of which they’ve already committed $2 billion to 25 countries — and 11 of them are Africans. Many of our countries need to move, to take advantage of this, and they are willing to commit $150 billion dollars over the next 15 months.

“The IMF has put forward $50 billion as an emergency fund, and already 80 countries have applied for this, many of them African.

“It also has a $1 billion grant fund; catastrophe containment and relief trust, which they can approach. Let me mention my own organisation, GAVI, where I am chair of the board. We have made immediately available $200 million to $300 million grant.

Also Read: Why Africa will face potential economic crisis and health disaster Over Coronavirus

“Once these monies become available, if the countries get debt relief, that means that the monies they would have been paying to service the debt that they’ve taken from other countries; bilateral debts or from institutions, this monies can now be used to procure food and supplied and support the livelihood of people in the rural and urban area.

“Government can use these resources as part of an intervention fund to help people directly, and I think this is what they should be looking to do. But we need to move quickly, the debt relief we haven’t got it yet.

“There needs to be a great deal of pressure on the G7, G20 to come forward with this measure and then countries need to start availing themselves of the already available resources, and then pressure for the debt relief.”

“You know we have several sources, you’ve got the African Development Bank, which has just floated a social bond for $3 billion that will be available to the countries on the continent,” she said.

Though, the G20 also said after an emergency meeting on Thursday it would address risks of debt vulnerabilities in low-income countries but failed to approve an IMF and World Bank proposal to freeze their bilateral debt payments.

According to reuter, In just two years from 2015 to 2017, African external debt payments doubled from an average of 5.9% of government revenue to 11.8%. At 32%, the proportion of debt owed to private lenders is almost on a par with multilateral institutions at 35%.

The World Bank has approved a $14 billion COVID-19 response package. While, IMF is making $50 billion available to support member countries, particularly the most vulnerable;from its emergency financing facilities and some 80 countries have already asked for help, including around 20 from Africa.

According to IMF, low-income countries, we have rapid-disbursing emergency financing of up to $10 billion (50 percent of quota of eligible members) that can be accessed without a full-fledged IMF program.