Africa’s Virus Recovery Hinges on Access to Good Loan Terms
African countries need access to favorable loan terms to rebuild their economies after the damage wrought by the coronavirus pandemic, according to South African President Cyril Ramaphosa.
While many African nations have taken advantage of assistance from multilateral lenders, including the International Monetary Fund and the World Bank, as well as a debt-relief program by the Group of 20 leading economies, “access to concessional finance will remain crucial as countries rebuild their economies,” said Ramaphosa, who is also the outgoing chairman of the African Union. South Africa is handing the chair of the 55-member continental bloc over to the Democratic Republic of Congo.
“An injection of fresh resources by the IMF through reallocating and issuing new special drawing rights, with a bias toward the developing world, will correct the glaring inequality in fiscal stimulus measures between advanced economies and the rest of the world,” he said.
While central banks and governments in North America, Asia and Europe have offered trillions of dollars to prop up businesses hit by lockdowns and provide a safety net for the swelling ranks of the unemployed, fiscal constraints and high levels of indebtedness have prevented African governments from providing similar relief.
After 25 years of uninterrupted economic growth, gross domestic product in sub-Saharan Africa probably contracted 3.7% in 2020 as a result of the pandemic, according to the World Bank. The lack of fiscal buffers are likely to weigh on the region’s recovery, with the pandemic having pushed the ratio of interest-to-revenue among sovereigns close to levels last seen before debt relief was extended in the 2000s, according to Fitch Ratings.
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