African finance ministers seek $100b cushion against coronavirus

African finance ministers have appealed for a $100 billion bailout package from international lenders to cushion their economies from effects of the coronavirus pandemic, which has put the entire continent in virtual lockdown.

In an appeal signed by South African Minister for Finance Tito Mboweni and his Ghanaian counterpart Ken Ofori-Atta, the African governments estimate that the economic disruption from the spread of coronavirus will cut the continent’s GDP by at least two to three percentage points this year.

“Africa needs huge and immediate additional resources of $100 billion for the immediate response, with lead from the multi-lateral financial institutions,” reads the report released by Vera Songwe, executive secretary of the United Nations Economic Commission for Africa (UN ECA), on behalf of African Ministers of Finance.

Dated March 22, the appeal is addressed to the World Bank, the International Monetary Fund (IMF), the European Investment Bank, European Central Bank (ECB), the African Development Bank and other partner institutions like Afreximbank and regional development banks.

Lost GDP

Although the impact of Covid-19 on Africa is yet to reach the levels experienced in Europe, Asia and North America, the continent has so far lost an estimated $29 billion worth of GDP to the pandemic, according to Uneca estimates.

With the economic crisis unfolding as the number of infections and mortality rises, Africa is appealing for a speedy disbursement of the bailout package in the form of suspension of debt service payments, budget support, extended credit facilities among other measures.

Globally, the Covid-19 infections were more than 500,000 as at the time of going to press on Friday, with over 24,000 deaths. African infections were above 3,200, with more than 83 deaths reported.

In East Africa, Uneca has cautioned the region to brace for disruptions in intra-regional trade, supply chains with major trading partners including China, commodity price shocks, battering of tourism and aviation sectors, and massive job losses.

Economic growth is expected to drop from 6.4 per cent in 2019 to about 3.4 per cent this year.

To help the continent combat the pandemic, the ministers want development partners to immediately waive interest payments on debt amounting to $44 billion for 2020, with possible extension to the medium term.

The waiver, which should include interest payments on public debt and sovereign bonds, would provide countries with fiscal space and liquidity.

In the case of the private sector, the continent requests a waiver of interest payments on trade credits, corporate bonds, lease payments and activation of liquidity lines for central banks to ensure countries and businesses can continue to purchase essential commodities without weakening the banking sector.

“This should be coupled with policies to keep businesses open in order to maintain jobs,” noted Dr Songwe.

In addition to debt relief, the continent is also seeking intervention for weak healthcare systems that could be overwhelmed in case of an exponential rise in infections.

The ministers appealed for healthcare funding, including the activation of the Global Fund, grant funding and safety nets for the most vulnerable including women and children, and ensuring the availability of testing material.

The ministers are also calling for a waiver of remittance fees given the expected slowdown of major economies that are the source of remittances to Africa.

“A waiver on the remittances fees will help mitigate against the expected decline in amounts sent,” said Dr Songwe.