The Resident Representative of the International Monetary Fund, IMF, to Ghana, Dr. Albert Touna Mama, has advised leaders of African economies to be inclined towards saving lives and improving the quality of healthcare in the wake of the coronavirus pandemic rather than seeking to contain expenditure to control budget deficits.
According to the IMF, seven of the 35 low-income countries in Sub-Saharan Africa are in debt distress, and a further nine have a high risk of debt distress.
The Fund also says China is the largest lender to African countries.
Speaking on the Point of View on Citi TV, Dr. Touna Mama said he believes a stronger economy post COVID-19 should be able to help African economies defray their debts accordingly.
“The challenge for a lot of our countries is that at the moment, they are spending more in servicing their external debts than what they are putting into the health sector so you want to be able to create enough space and debt cancellation obviously could be one of the options that it is unclear that they can get there. I think at a minimum, what has been pushed for is to have suspension of debt servicing for up to six months or say two years. The challenge at the moment is that for private creditors it is a bit more complicated than that to just re-profile the debt and you have a lot of debt that is pushing you at the same time,
“So how do you go about co-ordinating as a group of private creditors so that you can also chip in and help these countries? So in terms of taking account of the deficit, I think they have have been extremely aggressive as an institution to say really the priority here is to do whatever it takes provided that you can generate the finances to do it. In essence what we are actually saying is that for now let’s set aside the deficit and just do what is needed to save lives and safeguard livelihoods,” Touna Mama remarked.
The slowdown in economic activities across the globe has prompted some African financial ministers to ask for suspension of loan repayments with countries like China.
The Economic Commission for Africa (ECA), a regional agency of the United Nations, has warned that the pandemic could cut the continent’s GDP from 3.2 per cent to below 2 per cent as the crisis disrupts global supply chains.
The ECA has estimated that export revenues will fall US$101 billion, including US$65 billion for the oil-producing countries including Angola and Nigeria, as crude oil prices continue to tumble.
A statement issued by African Finance ministers in April asked the G20 (which is an economic group of government and central bank representatives from 20 of the largest economies) for an urgent US$100 billion rescue package, including US$44 billion in written-off debt.
The ministers have also indicated that they may need an additional US$50 billion next year if the crisis were to continue.