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The G20’s promise of a debt freeze is not enough for Africa to combat the COVID-19 crisis ǀ View

By May 26, 2020 No Comments

Nearly four months since the World Health Organisation (WHO) declared the COVID-19 outbreak as a Public Health Emergency of International Concern, the virus has brought the world to a standstill. As the number of global cases of COVID-19 stands at over 2 million and the death toll has surpassed 140,000, billions of people remain in lockdown.

While the African continent has been spared from the high concentration of community cases seen elsewhere, the numbers are increasing rapidly and the impact is worrisome. Just 10 weeks after Egypt had announced its first case, Africa now has more than 18,000 infected people and recorded over 900 deaths.

If the infections continue to rise, Africa’s weak healthcare systems will be immensely overwhelmed and not able to deal with the raging virus. Since many African countries are still recovering from – or are still dealing with – recent outbreaks, like Ebola, measles, Lassa, and other diseases, the continent is even more vulnerable to the impact of COVID-19. As we’ve seen elsewhere in the world, even the best health systems have struggled to respond to the outbreak, and are crumbling under the pressure exerted by this pandemic.

The continent is in danger of losing 30 million jobs, with more than a third of African countries at risk of debt distress. According to the African Union, it is projected that exports and imports of African countries will reduce by at least 35% from the level reached in 2019, which is a loss estimated at around $270 billion (€249 billion). The UN Economic Commission for Africa (UNECA) has also estimated that the continent may lose half of its GDP growth (from 3.2% to 1.8%), particularly due to supply chain disruptions, shrinking investment and lower remittances.

Globally, 64 countries — 30 of which are in Sub-Saharan Africa — spend more on repaying public debt than investment on public health.

Edwin Ikouria
Africa Executive Director of ONE Campaign

Earlier this week, G20 finance ministers and reserve bank governors of the world’s biggest economies held a virtual meeting to agree on ways they could help African countries and elsewhere to free up liquidity in order for them to direct funds towards healthcare systems and economic recovery. This includes an agreement to implement a debt freeze for poor countries, starting from 1 May until the end of the year, with an option to extend until the end of 2021. It is definitely not enough.

Globally, 64 countries — 30 of which are in Sub-Saharan Africa — spend more on repaying public debt than investment on public health. For example, the Gambia spends nine times more on debt repayment than its annual health budget. Similarly, Angola and the Republic of Congo spend six times more on external debt repayment than their health budgets.

A debt freeze till the end of the year is an inadequate timeframe for African countries to recover from the economic consequences of the virus. A two-year timeframe will give African countries a better recovery time to be able to deal with the enormous consequences of the pandemic.

China should also play a leading role in debt relief for African countries as it has become a prominent lender to Africa, with new loans increasing from $130 million (€120 million) in 2000, to a peak of $29 billion (€27 billion) in 2016. The Chinese government must be proactive in coordinating debt relief in the same way they have vigorously facilitated deals with African economies. Beyond the immediate relief, projects that are financed by Chinese, or any loans for that matter, must be transparently negotiated to allow public scrutiny and accountability.

In addition to a debt freeze until 2021, G20 leaders must also deliver an emergency economic stimulus of $100 billion (€92 billion) for Africa, as requested by African governments through African finance ministers.

Edwin Ikouria
Africa Executive Director of ONE Campaign

In addition to a debt freeze until 2021, G20 leaders must also deliver an emergency economic stimulus of $100 billion (€92 billion) for Africa, as requested by African governments through African finance ministers, to fund the immediate health response on the continent, social safety nets for the most vulnerable, feeding and protecting out of school children, and to safeguard 30 million jobs. To deliver this, the International Monetary Fund (IMF) should create at least $500 billion (€461 billion) Special Drawing Rights (SDRs) to provide poorer countries with liquidity to manage the crisis, accompanied by the cancellation of debt interest payments for 2020. The IMF may allocate SDRs to members in proportion to their quotas; this means creating new money through an international agreement, a form of global “quantitative easing.” No country or taxpayer would have to pay a cent. Richer countries could then transfer their allocations to a trust for use by poorer countries to help them finance their response to the crisis.

  • Edwin Ikouria is the Africa Executive Director of ONE Campaign, an NGO that fights extreme poverty and preventable disease.

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