By Simi Siwisa, Absa Group Head of Public Policy
This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
The IMF anticipates that the “Great Lockdown” will have a more devastating impact on the global economy than the Global Financial Crisis. For the African continent, it is forecasting “an unprecedented threat to Africa’s development with a decline projected at “1.6% in 2020, and real per capita income to fall by even more – 3.9% on average.” This is because many African economies are disproportionally affected by sudden stops in the global economy. A collapse in global demand and supply has resulted in a sharp decline in key commodity prices and export volumes. Related to this, flight to safety has resulted in tighter financial conditions with more than $4.2 billion outflows from African countries since February 2020. Less optimistic, the World Bank forecasts that Sub-Saharan Africa will “contract 2.1% to 5.1% from growth of 2.4% last year, costing the region $37 billion to $79 billion in output losses’. Under any scenario, the outlook for Sub-Saharan Africa remains bleak, and urgent interventions are required to prevent unmitigated health, social, economic and political crises. Debt relief is an important component of the crisis-response package. As David Pilling put it in the Financial Times, debt relief to Africa is in the self-interest of the rest of the world. However, for these efforts to work and not sow the seeds of future financial problems, the lessons from past debt relief initiatives and the changed nature of Africa’s debt must be taken into account. Continue reading