The debt crisis in Africa has been slow burning and is now vastly aggravated by Covid-19. Africa’s outstanding public debt was US$1,330 billion in 2019, i.e. 57% of the continent’s Gross Domestic Product (GDP), and now stands at US$500 billion. For some countries, debt servicing represents more than 25% of their revenues, and most countries spend more on debt payments than on health.
African governments are now struggling to find the money to fight the pandemic and save lives, imperatives undermined by the demands of debt servicing. In contrast, rich countries are investing about 8% of their Gross Domestic Product (GDP), on average, on economic interventions and stimulus measures, while African countries are spending an average of 0.8% of their GDP, which measure hides significant differences across African countries.African economies, and all productive sectors, are greatly impacted by the pandemic. The collapse of commodity prices and tourism which provides tax revenues and hard currency to many countries, combined with reduced remittances from the African diaspora, further aggravate the situation of many countries whose reserves are rapidly depleting. With the limited foreign exchange reserves countries have left, they will need to choose between investing in health and welfare services to respond to Covid-19 or repaying external debt. The continent is also a victim of illicit capital outflows with approximately $850 billion withdrawn from the continent between 1970 and 2008. These illicit flows have crippled African countries and undermined their ability to develop their economies and respond to the unfolding debt and climate crises.
Given all of this, the Covid-19 crisis is likely to trigger large-scale balance-of-payments crises, a sharp decline in production and employment, and a rapid increase in poverty. To avoid this, emerging and developing economies need to have their external debt written off. Humanly speaking, it is better to cancel a debt to meet the needs of citizens than to pay it to creditors
We, as African organisations (national and regional) and our allies, call on the African Union, African Heads of State, International Financial Institutions, Chinese lending bodies and private creditors for a total and unconditional cancellation of African debt.
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