The global system is as strong as its weakest link. The pandemic will only be beaten in rich countries when it is beaten everywhere else, writesand
THE coronavirus Covid-19 has spread increasingly rapidly throughout Africa. Unless the continent urgently receives more assistance, the virus will cut a deadly path across it, with grim consequences. We are calling for immediate debt relief for African countries to create the fiscal space their governments need to respond to the pandemic.
Combating Covid-19 is more challenging in Africa. Healthcare across the continent remains limited. One third of Africans cannot wash their hands regularly, because they lack 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 instituting states of emergency, requiring physical distancing, imposing quarantines, and restricting travel and public gatherings. And private-sector firms, civil-society groups, and grassroots movements are joining the fight. The African Union has adopted a joint continental strategy and established a task force to coordinate the efforts of member states. The WHO is resolving to assist African governments.
But the key challenge is resources. Africa needs an initial €100bn in support, because sharp declines in commodity prices, trade, and tourism — a result of the pandemic — are drying up government revenues. Investor pullback from risky assets has pushed up the cost of borrowing in financial markets, limiting viable options for resource mobilisation.
The average fiscal-support package announced by African governments amounts to a meagre 0.8% of GDP, one-tenth the level in advanced economies. And the continent’s additional financing needs could rise to €200bn.
True, international and regional institutions are complementing national efforts. The African Development Bank issued a €3bn ‘Fight Covid-19’ social bond, while the African Export-Import Bank has set up a €3bn credit facility.
The G20 called for a collective response to assist the world’s most vulnerable countries, pledged immediate resources on a voluntary basis, and instructed finance ministers and central-bank governors to develop an action plan.
International organisations — including the World Bank, the IMF, the United States Agency for International Development, the Global Fund, and Gavi, the Vaccine Alliance — have all announced support for developing countries. And the high uptake of these schemes illustrates African governments’ resource shortages.
Still, global support for Africa has not gone far enough. We back the urgent call by the IMF and the World Bank for bilateral debt relief for low-income countries. This should be matched by parallel treatment regarding private and commercial debt, which now accounts for a significant share of many African countries’ external debt.
We call for a two-year standstill on all external-debt repayments, both interest and principal. During this standstill, the G20 should task the IMF and World Bank with undertaking a debt-sustainability assessment and with considering further debt restructuring, to preserve or restore debt sustainability.
Debt relief should also extend to middle-income countries that currently are experiencing capital flight and unsustainable debt burdens. Assessments of these economies’ debt sustainability must go beyond the debt-to-GDP ratio and also consider the ratio of debt-service payments to government revenue.
Several middle-income countries spend 20% of their revenues on debt service, which crowds out much-needed health, education, and infrastructure expenditures. With immediate debt relief, African governments can focus on protecting vulnerable populations, bolstering social-safety nets, and supporting the private sector, especially small- and medium-size enterprises. That includes paying these firms’ arrears and ensuring credit flow, so as to avoid a prolonged banking and economic crisis.
Such measures will preserve jobs. Without them, Africa could face an unprecedented human and economic catastrophe that could morph into even costlier political and social instability.
The global health system is only as strong as its weakest link: success in combating the pandemic in any country will be short-lived until every country succeeds. Beyond the immediate responses, the pandemic and its economic fallout highlight the longer-term need to strengthen Africa’s health systems, diversify its economies, and broaden domestic revenue sources. Achieving these goals matters for the entire world.
This commentary is also signed by the Council on Foreign Relations; Donald Kaberuka, a former president of the African Development Bank and board chair of the Global Fund; Vera Songwe, executive secretary of the United Nations Economic Commission for Africa; Strive Masiyiwa, founder of Econet Global; Louise Mushikiwabo, secretary general of the Organisation Internationale de la Francophonie; and Cristina Duarte, a former finance minister of Cabo Verde.