AfDB backs UN call on debt repayments
• African Development Bank echoes UN in urging repayment suspension
The African Development Bank (AfDB) has backed calls by the UN that debt repayments of low-income countries be suspended as part of efforts to deal with the economic fallout from the coronavirus. AfDB president Akinwumi Adesina further called for the lifting of all sanctions.
The African Development Bank (AfDB) has backed calls by the UN for debt repayments of lowincome countries to be suspended as part of efforts to tackle the economic fallout from the coronavirus.
AfDB president Akinwumi Adesina further called for the lifting of all sanctions.
“Even in wartime, ceasefires are called for humanitarian reasons. In such situations, there is a time to pause for relief materials to reach affected populations. The novel coronavirus is a war against all of us. All lives matter,” Adesina said.
The pandemic has caused pandemonium across the globe, bringing economies to a standstill and stretching medical facilities. It has left the global economy reeling and stocks plummeting, amid fears of a jobs bloodbath. Globally, more than 1.3-million people have been infected by the coronavirus up to this week, according to data from Johns Hopkins University. Nearly 74,000 people globally have died of Covid-19.
The AfDB estimates the coronavirus could cost Africa a GDP loss of $22.1bn (about R402bn) in the best-case scenario and $88.3bn in the worst-case scenario. This is equivalent to a projected GDP contraction of between 0.7 and 2.8 percentage points in 2020. The bank said the pandemic shock will further squeeze fiscal space on the continent as deficits are estimated to widen by 3.5 to 4.9 percentage points, increasing Africa’s financing gap by an additional $110bn to $154bn in 2020.
Its estimates indicate that
Africa’s total public debt could rise, under the base-case scenario, from $1.86-trillion at end2019 to more than $2-trillion in 2020, compared to $1.9-trillion projected in a “no pandemic” scenario. “This is a time for bold actions,” Adesina said.
“We should temporarily defer the debt owed to multilateral development banks and international financial institutions. This can be done by reprofiling loans to create fiscal space for countries to deal with this crisis.” He said he is calling for temporary forbearance, “not forgiveness”.
‘MORAL HAZARDS’
“That way, we will avoid moral hazards, and ratings agencies will be less inclined to penalise any institution on the potential risk to their preferred creditor status. The focus of the world should now be on helping everyone, as a risk to one is a risk to all,” Adesina said.
His comments come after reports emerged that he and other executives at the bank are being probed for “favouritism and hindering efficiency”, among other allegations.
The AfDB chief said the bank is ready to support Africa in the short term and for the long haul, and will deploy up to $50bn over five years in projects to help with adjustment costs.
“While rich countries have resources to spare, evidenced by trillions of dollars in fiscal stimulus, developing countries are hampered by bare-bones resources. The fact is, if we do not collectively defeat the coronavirus in Africa, we will not defeat it anywhere else in the world,” said Adesina.