Washington: The International Monetary Fund (IMF) is hoping more private commercial holders of African bonds will join a global push for debt relief as the continent faces a $44 billion shortfall in its fight against the effects of the Covid-19 pandemic.
The IMF estimates that Africa needs $114 billion in 2020 to spend on health and social services that would be offset by continuing significant debt payments, Abebe Aemro Selassie, director of the lender’s African department, said by phone Friday. So far, mutilateral and bilateral creditors have pledged about $57 billion in financing and relief, and private-creditor support could add another $13 billion, the IMF said Friday.
“In countries that are being ravaged by a pandemic, the ability to service any obligation is going to be difficult,” Selassie said. “Giving countries the breathing room that they need this year makes absolute economic sense.”
Selassie spoke after a virtual meeting with top African officials and the heads of multilateral institutions to spur faster action and cooperation on the Covid-19 response among African countries. The United Nations Economic Commission for Africa estimates that pandemic could kill 300,000 people on the continent, even with assertive government measures to limit social interactions and said at least $200 billion to beef up health-care systems and social-safety nets and provide emergency economic stimulus.
“If you don’t get this disease out of Africa and you don’t do so quickly and without too much economic damage, it’s going to rebound and hit everybody,” Selassie said.
The IMF is already projects sub-Saharan Africa’s gross domestic product will contract by 1.6% in 2020, the worst outcome on record. Annual growth was 3% or more since 2017 and averaged 4.5% in the seven years before that.
“What we’re seeing is threatening to reverse the strong gains that had been made by many in the region, including the region’s own private enterprises,” Selassie said. “Companies that were doing really well are now facing really very large liquidity challenges and a massive disruption to their operations.”
IMF Managing Director Kristalina Georgieva said on Friday the lender is mobilizing more than $18 billion for Africa this year, responding to over 40 requests from countries on the continent.
African officials at the meeting asked the IMF and World Bank to resolve a requirement that nations must be up to date with their debt payments to the institutions to access the financing by clearing arrears for countries including Zimbabwe, Sudan and Eritrea, Selassie said.
On Wednesday, the G-20 agreed to suspend debt-service payments for poor countries that request it from May 1 until the end of the year, freeing up about $20 billion. Selassie praised the announcement by the group, which includes China and several wealthy countries in the Middle East, and echoed the G-20’s call for private creditors to make the same gesture, if only for their own benefit.
“The possibility of a cascading failure, even for countries just facing liquidity rather than solvency challenges, is very high,” he said. “So it’s also in their interest to make sure that there remains an orderly financial market environment.”
‘Keep the Receipts’
Selassie said the IMF and Georgieva are aware that the rapid influx of money is raising concerns about corruption.
“As Kristalina has been saying, you know, spend the money, support your people, but keep the receipts, because we will be wanting to see them,” he said.