Africa: Positive Moves After Finance Ministers Call for Debt Relief During COVID-19 Crisis

Debt relief petition by Africa's ministers of finance and UNECA.
7 April 2020

Dakar — The appeal Africa's ministers of finance made to bilateral, multilateral and commercial partners after their online conferences of March 19 and 31, 2020, for the alleviation of their debt, has begun receiving positive responses.

The sessions were organised by the UN's Economic Commission for Africa .

French Minister of Economy and Finance Bruno Le Maire has responded favourably to that appeal, proposing a debt moratorium for developing countries, particularly African ones.

Le Maire's proposal is part of a series of measures announced on April 2, 2020. The Paris financier tabled a moratorium on the poorest countries’ debt during the next few months, and specified that "the Paris Club, which has experience for such situations, should be at the forefront guard of this initiative".

Among other proposals of financial support in favour of developing countries, particularly those in the African continent, Le Maire proposed the opening of IMF Special Drawing Rights (SDRs) up to US$500 billion.

To this, he added the implementation of a new fast line of credit to supplement Central Bank swap lines in order to protect against a risk of liquidity in foreign currencies.

The debt alleviation proposal made during the online meetings organized by the UNECA aims to ensure that African countries have the budgetary capacity necessary for facing the COVID-19 crisis.

The African ministers' appeal was also taken up by the World Bank and the IMF, which called on all public bilateral creditors to suspend, with immediate effect, payments for the reimbursement of the debt of developing countries that ask for an exemption.

It should be noted that the debt alleviation appeal involves the whole African continent and must be undertaken in a coordinated and collaborative manner, the African ministers said.

UNECA Executive Secretary Vera Songwe had detailed the urgent need for a favourable response to the debt relief appeal during her discussions with a group of the continent’s media leaders, held on April 2.

In the same vein, the ministers of economy and finance of the continent call for the creation of a special purpose vehicle in view of meeting all sovereign debt obligations.

Substantial declines in revenues resulting from falling commodity prices coupled with higher import costs put pressure on inflation and the exchange rate.

In the same line, the United Nations Conference on Trade and Development (UNCTAD) asked that developing countries receive aid of US$2.5 trillion to overcome the health and economic shock caused by COVID-19, and, in particular, that US$236 billion of the African debt be deferred or cancelled.

It is also worth noting that Akinwumi A. Adesina, President of the African Development Bank, in a column dated April 6, expressed his support to the appeal for the suspension of the debt of low-income countries in these times of uncertainty. 

Advocacy for a common African front in the global governance

Senegal's Minister of Economy, Planning and Cooperation Amadou Hott, during a TV debate on local private broadcaster TFM, announced several offers of financial aid expressed by developed countries in favour of Senegal and Africa in general.

A breath of fresh air which, according to him, will avoid widening the Budget deficit from which most of the continent’s countries suffer.

In his address to the nation, President of the Republic of Senegal Macky Sall renewed his appeal to bilateral and multilateral partners to support the African countries’ by cancelling public debt and rescheduling the private debt according to mechanisms to be agreed upon.

Sall had already made this invitation to G20 States at the beginning of the novel coronavirus crisis.

The Senegalese leader promised to relentlessly pursue these efforts at the sub-regional and continental level for a common African front in global governance and for the management of the impact of COVID-19.

“ When a crisis hits all economies, the weakest will obviously be the most affected. The turmoil in the world has revealed the fragility of all countries and their common vulnerabilities. Therefore, it is time to rethink the order of priorities,” he said.

He then proposed working together “for the advent of a new world order that puts people and humanity at the heart of international relations”.

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