JOHANNESBURG - African countries, including South Africa, have been thrown an economic lifeline after the World Bank indicated it was willing to call for a standstill on debt repayments, amid the Covid-19 pandemic.
The World Bank’s vice-president for Africa, Hafez Ghanem, said last week that the bank was willing to call for a standstill on debt repayments as African countries, in particular, were likely to be hard hit by the pandemic.
The bank is deploying up to $160billion (R2.87trillion) in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery.
The World Bank slashed its 2020 growth forecast for sub-Saharan Africa last week, saying the region’s economy would fall sharply from 2.4percent in 2019 to between -2.1 to -5.1percent this year due to Covid-19.
“We are rallying all possible resources to help countries meet people’s immediate health and survival needs, while also safeguarding livelihoods and jobs in the longer term, Ghanem said.
This included calling for a standstill on official bilateral debt service payments, which would free up funds for strengthening health systems to deal with Covid-19 and save lives; social safety nets to save livelihoods; and help workers who lose jobs; support small and medium enterprises, and food security,” Ghanem said.
World Bank’s lead economist Cesar Calderon said creditors should consider debt relief, while sub-Saharan African countries fix their deteriorating fiscal positions, and heightened public debt vulnerabilities.
“The immediate measures are important, but there is no doubt there will be need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight Covid-19 and help manage or maintain macroeconomic stability in the region,” Calderon said.
The African Union Bureau of Heads of State has called on creditor nations and multilateral institutions to suspend interest payments for Africa on its external public and private debt.
Goldman Sachs Group said the funding needs of governments in sub-Saharan Africa could rise by $75bn as the coronavirus pandemic hammers their economies.
Meanwhile, International Monetary Fund (IMF) managing director Kristalina Georgieva said the fund would look for solutions that can unlock crucial financing where they might be unable to lend, because a country’s debt was unsustainable.
Georgieva said they were working around the clock to support the IMF’s member countries with policy advice, technical assistance and financial resources, as the IMF had $1trln in lending capacity.
“We have revamped our Catastrophe Containment and Relief Trust (CCRT) to provide immediate debt relief to low-income countries affected by the crisis, thereby creating space for spending on urgent health needs rather than debt repayment. We are now working with donors to increase the CCRT to $1.4bn to extend the duration of the debt relief,” Georgieva said.