Coronavirus: Africa must act on World Bank/IMF debt-relief proposal
Coronavirus compounds existing poverty challenges in sub-Saharan Africa (SSA) and requires urgent action to avoid economic collapse.
Even before coronavirus struck, SSA was the epicentre of global poverty. Of the 46 countries that make up the zone, 23 are classified by the World Bank as low-income, with a gross national income (GNI) per head of $1,025 or less.
The World Bank’s poverty data indicates that the percentage of the population living on less than the international poverty line of $1.90 per day ranges from 38% in Chad to 77% in Madagascar.
SSA’s COVID-19 cases are increasing rapidly, and it is the region least equipped to save lives while sustaining the economy and employment. As the region’s governments attempt to stop the spread, they run into at least four major problems:
- First, healthcare systems – which were already rudimentary – cannot cope with the sudden increase in the number of patients.
- Second, because the workforce in the region is largely comprised of workers who depend on daily wages, total lockdown is tantamount to starvation.
- Third, these countries do not have money to supplement their citizens’ incomes if employees in the public and private sectors do not report to work. Nor are SSA governments able to save the private sector from total collapse if businesses have to cease their operations for months.
- Fourth, the closure of international borders means SSA can neither export the raw materials it depends on, nor draw tourists that constitute considerable inflows of capital. This is also true of foreign direct investment.
In other words, SSA’s economies could soon grind to a halt.
Immediate assistance proposed to the poorest countries
On 25 March, the World Bank and IMF issued a joint statement to the G20 concerning debt relief for the world’s poorest countries. The Bank and the IMF called on bilateral creditors to suspend debt payments from poor countries that request the relief with immediate effect.
They argued that this relief will help low-income countries’ immediate liquidity needs to tackle the coronavirus outbreak.
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Crucially, the two funders recognise the money freed by the suspension of debt repayment is only the first step that will allow time for an assessment of the crisis’s impact and the financing needs of each country.
The two institutions indicated their readiness to identify countries with unsustainable debt situations and to prepare a proposal for comprehensive action by official bilateral creditors to address financing and debt-relief needs.
Sub-Saharan Africa needs such a proposal
Currently, the African Union (AU) is led by South Africa’s President Cyril Ramaphosa.
Because South Africa is the African country (so far) most affected by coronavirus and Ramaphosa is busy managing the crisis at home, the AU has not presented a coherent strategy for addressing the coronavirus pandemic.
The joint World Bank/IMF call to action is the only proposal currently on the table. Sub-Saharan Africa should therefore immediately embrace the proposal and urgently take action accordingly.