African economies could swing into a depression without a debt moratorium of at least three years, Ghana’s Minister of Finance Ken Ofori-Atta said.
“If we don’t intervene in Africa and manage a way for pushing this debt servicing out for at least three years, are we going to move into a depression and then make the tail of recovery a lot longer than it should be?” Ofori-Atta said on a virtual conference organized by the Harvard University Center For African Studies.
Countries in the region need the debt standstill to free up funds to revitalize economies battered by the coronavirus pandemic, Ofori-Atta said. The idea of Africa servicing “US$44B of loans within one year is just not possible,” he said.
Ofori-Atta has led a group of African finance ministers supporting a debt-relief proposal engineered by the United Nations Economic Commission for Africa. The Uneca and the finance chiefs initially said the continent will need a stimulus package of US$100B — including US$44B in debt-servicing waivers — to face the virus. South African President Cyril Ramaphosa, who chairs the African Union, said last week the continent could get more than US$200B in additional support from the UN’s call for a global response package amounting to at least 10% of the world’s gross domestic product.
The World Bank said in April sub-Saharan Africa will suffer its first recession in 25 years with GDP contracting between 2.1% and 5.1%.
The Group of 20 leading economies in April agreed to grant a debt waiver of about US$20B until the end of the year. The International Monetary Fund and some G-20 members have supported an AU idea to extend the waiver to two years.
Debt-relief talks are getting “extremely” difficult due to a growing sense that the pandemic has slowed, Ofori-Atta said. Meanwhile, credit rating agencies are still looking at the vulnerabilities of African countries’ balance sheets, he said.
“Suddenly the western world can print US$8T to support their economies in these extraordinary times,” while Africans are judged “by the old rules,” he said. “You really feel like shouting ‘I can’t breathe.’”