(5 minutes)
· To address the looming debt crisis, African countries will need more long-term support than the latest G20 debt plan offers them
· A more accommodative approach can catalyze flow of more investments, according to policymakers, analysts and investors
· The UN Economic Commission for Africa is pitching for measures to unlock US$500bn to help avoid leaving lasting scars due to prolonged funding gaps in the poorest economies
To address the looming debt crisis, African countries will need more long-term support than the latest G20 debt plan offers them. A more accommodative approach can catalyze flow of more investments, according to policymakers, analysts and investors.
According to them, anywhere close to 40 percent of sub-Saharan African countries are in or at risk of debt distress even before the onset of Covid-19. It is important to note, Zambia has become the first debt defaulting country, though the southern African country asserts that it could have paid back the debt; but refused to do so to
adhere to the broad consensus among the countries in the region that the lender organizations and countries should evolve an empathetic attitude towards the debtor countries.
Economically powerful countries like the United States, China and other G20 countries have evolved strategies for addressing the debt crisis of the poorer countries; many of them are in Africa. They offered no relief until at least mid-2021 and framed rules for rescheduling government debt to help fend off the risk of default in
the wake of the coronavirus crisis. But poorer countries, particularly from Africa say that such reliefs provide only near-term breathing space and might not be able to meet the requirements of most of the African countries.
Vera Songwe, executive secretary at the UN Economic Commission for Africa is pitching for measures to unlock US$500bn to help avoid leaving lasting scars due to prolonged funding gaps in the poorest economies.
The debt ratios of sub-Saharan African countries had already risen sharply before COVID-19. Earlier, The International Monetary Fund and World Bank launched the Highly Indebted Poor Countries (HIPC) initiative designed to bring down debt burdens of some 30 low-income countries on the continent. With the discontinuation of that scheme, the debt burden of every poorer country in the continent has gone up.
Admittedly, political leaders in countries like Ethiopia and Ghana have pushed for outright debt cancellations and longer time suspension of servicing and repayment for the continent’s poorest countries. UNECA and some private investors, have also suggested that the development banks can give loans and guarantees to bring down borrowing costs for countries, which are under severe pressure.
