The governor of the Central Bank of Nigeria (CBN), reacting to calls by citizens to take drastic action against the free fall of the naira against ... the US Dollar, was quoted in a report saying: "Domestically, there has been zero dollar remittance to the country’s foreign reserve by the NNPC. Monetary policy alone cannot bear all the burden of the expected adjustments needed to manage all these difficulties. It’s our collective duty as Nigerians to shore up the value of the naira.’’
After a slow start, COVID-19 has spread increasingly rapidly throughout Africa, with more than 7,000 confirmed cases and 294 deaths across 45 countries and two territories as of 7 April.
Unless the continent urgently receives more assistance, the virus will continue to cut a deadly and remorseless path across it, with ever grimmer health and economic consequences. As an essential first step, therefore, we call for immediate debt relief for African countries in order to create the fiscal space governments need to respond to the pandemic.
After all, combatting COVID-19 is more challenging in Africa than in other parts of the world.
Access to quality health care across the continent remains limited, despite some countries’ recent progress. One-third of Africans cannot wash their hands regularly, because they lack access to clean water.
But the key challenge is the availability of resources.
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 responding to COVID-19 with determination, including by instituting states of emergency, requiring physical distancing, imposing forced quarantines, and restricting travel and public gatherings. And private sector firms, civil society groups, and grassroots movements are joining the fight any way they can.
For its part, the African Union, to ensure synergy and minimize duplication, has adopted a joint continental strategy and established a task force to coordinate the efforts of member states and partners. The World Health Organization also is showing resolve to assist African governments.
But the key challenge is the availability of resources.
Africa needs an initial $100bn in financial support, because sharp declines in commodity prices, trade, and tourism -a direct result of the pandemic – are causing government revenues to dry up fast. Meanwhile, investor pullback from risky assets has pushed up the cost of borrowing in financial markets, limiting viable options for resource mobilization.
Unsurprisingly, therefore, the average fiscal support package announced by African governments so far amounts to a meager 0.8% of GDP, one-tenth the level in advanced economies. And, beyond the near term, the continent’s additional financing needs could rise to $200bn.
True, international and other regional institutions are stepping in to complement national efforts. The African Development Bank recently issued a $3bn “Fight COVID-19” social bond, while the African Export-Import Bank has set up a $3bn credit facility.
Moreover, the G-20 recently called for a coordinated collective response to assist the world’s most vulnerable countries, pledged to provide immediate resources on a voluntary basis, and instructed finance ministers and central-bank governors to develop an action plan. International organizations—including the World Bank, the International Monetary Fund, the United States Agency for International Development, the Global Fund, and Gavi, the Vaccine Alliance—have all announced programs to support developing countries. And the high uptake of these schemes by African governments illustrates the resource shortages they face.
These efforts notwithstanding, however, global action and support for Africa to date have not gone far enough. We therefore strongly support the urgent call by the IMF and the World Bank for bilateral debt relief for low-income countries. Furthermore, we believe that 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.
The COVID-19 pandemic has revealed the extent of our interconnectedness, reminding us of how closely the fates of all countries are intertwined.
Because time is of the essence, we call for a two-year standstill on all external debt repayments, both interest and principal. During this standstill, the G-20 should task the IMF and World Bank with undertaking a comprehensive debt sustainability assessment and considering further debt restructuring, where appropriate, 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 currently spend 20% or more of their revenues on debt service, which crowds out much-needed health, education, and infrastructure expenditures.
With the benefit of immediate debt relief, African governments should focus on protecting vulnerable populations and bolstering social safety nets. And, like governments elsewhere, they should also support the private sector, especially small and medium size enterprises. That includes paying these firms’ arrears, and ensuring minimal disruption to the flow of credit, in order to avoid a deeper and more prolonged banking and economic crisis.
Such measures will help to preserve jobs. Without them, Africa could face an unprecedented human and economic catastrophe that could morph into even costlier political and social instability.
The COVID-19 pandemic has revealed the extent of our interconnectedness, reminding us of how closely the fates of all countries are intertwined. 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, therefore, the pandemic and its economic fallout highlight the longer-term efforts needed to strengthen Africa’s health systems, diversify its economies, and broaden domestic revenue sources. Achieving these goals matters not just for the continent, but for the entire world.
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