China’s President, Xi Jingping has announced that China will exempt some African countries from repaying zero-interest rate loans due at the end of 2020, according to Reuters News agency.
Speaking at the China-Africa Summit, President Xi Jingping stated that, under the framework of the China-Africa cooperation forum, China will further extend loan payment forbearance for some countries including African countries.
He also stated that China is willing to give priority to African countries once COVID-19 vaccines are ready to use.
Africa accounts for just a fraction of global cases of the novel Coronavirus, but the continent is already feeling the impact, with the continent’s economies expected to contract, putting about 20 million jobs at risk.
In the wake of the novel Coronavirus pandemic,Ghana’s Finance Minister, Ken Ofori-Atta, urged China to help ease the debt burden of African countries expected to struggle with the economic impact of the coronavirus pandemic.
He said that African economies could swing into a depression without a debt moratorium of at least three years, if nothing is done to intervene in Africa and manage a way for pushing debt servicing.
He has already indicated that the cumulative effect of the novel coronavirus pandemic will cost Ghana GHS9.505 billion.
“China has to come on stronger” on debt relief during “this apocalyptic moment. I think our African debt to China is $145 billion or so. About $8 billion of payments is required this year [2020] and about $3 billion being interests; so that needs to be looked at,” he noted.
COVID-19:Ghana gets $500m debt repayment freeze from World Bank
Ghana has already secured a $500-million dollar freeze in debt and interest repayment for the rest of this year from the World Bank.
This forms part of a Pan-African effort to bring debt relief to Africa due to the economic impact of the novel coronavirus pandemic according to President Akufo-Addo.
IMF approves $500m in debt relief for 25 countries amid COVID-19 challenges
The International Monetary Fund has (IMF), has already approved an amount of US$500 million in grant-based debt service relief to 25 countries to help them deal with the negative impact of the COVID-19 on their various economies. Countries that will benefit from the grant include “Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, DR Congo, and The Gambia.
The others are Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo, and Yemen.
African finance ministers also are calling for a $100 billion stimulus package, including a suspension of debt service payments, to help the continent combat the virus.
The proposed interest payment waiver would include not only interest payments on public debt, but also on sovereign bonds. It would save governments an estimated $44 billion this year, and would possibly need to be extended to the medium-term, it added.
Also, the World Bank has stated that sub-Saharan Africa will suffer its first recession in 25 years with GDP contracting between 2.1% and 5.1%.
The Group of 20 leading economies in April agreed to grant a debt waiver of about $20 billion until the end of the year. The International Monetary Fund and some G-20 members have supported an AU idea to extend the waiver to two years.
Gov’t must be tactical in seeking for debt relief from China – Peter Quartey
Earlier this year, Economist, Prof. Peter Quartey, urged government to be tactical in seeking for debt relief from China to ease the pressure on Ghana due to the fight against COVID-19.
Already, the amount of credit granted by China to African countries in the last two decades, has seen a sharp increase. China has always granted loans to African countries on commercial basis, a situation that makes most African countries vulnerable to debt distress as the world battles the COVID-19 pandemic.
Due to China’s granting of loans on bilateral basis rather than to the regional bloc, Prof. Peter Quartey told Citi Business News African countries must appeal to China on humanitarian grounds for debt relief or rescheduling.
Meanwhile, some observers have called on African leaders to approach the debt relief appeal through regional blocs such as ECOWAS and the African Union to help present a coordinated force from the continent.
