The COVID-19 global pandemic has greatly hit African economies and has threatened the debt sustainability of levels of some of these teething economies on the continent.
Following the pandemic and it’s accompanied shutting down of economies in order to contain the spread of the virus, the revenue mobilization effort of these countries have been hard hit. For instance, some estimated US$65 billion in revenue is projected to be lost by petroleum exporting countries according to the Economic Commission of Africa (ECA).
Another US$101 billion revenue from sales of petroleum products in Africa is projected to go down the drain.
These shortfalls in revenue in these African economies are projected to further deteriorate the indebtedness of these economies especially to the People’s Republic of China. Currently, Africa’s total external debt is estimated at US$700 billion of which US$168 billion (24%) is owed to the Chinese government, Chinese state-owned enterprises (SOEs), Chinese banks, and Chinese private investors.
In addition, between 17% and 20% of African governments’ external interest payments are made to China. Further, China accounts for about 62% of bilateral interest payments in Africa. Thus, a substantial portion of Africa’s total external debt and interest payments is committed to China.
Against this backdrop, it has become a clarion call for debt relief programs to be instituted by the Chinese government and other development partners to aid African economies whose debt overhang has been further deepened following the outbreak of the pandemic.
In view of this, Ghanaian Chartered Economist cum Business Consultant, Dr. Ebenezer Ashley has prescribed some measures to African economies in order to salvage the situation.
In an article copied to ABC News, Dr. Ashley recognized the high indebtedness of the African continent to China. He indicated that the socio-economic woes brought about by the coronavirus pandemic in terms of debt position can only be addressed by three major debt considerations.
He, therefore, enumerated these considerations as debt restructuring, debt postponement, and debt cancellation.
“Challenging socio-economic times such as this call for three major debt considerations. These include debt restructuring, debt postponement, and debt cancellation. It is hoped China’s option for dialogue through bilateral initiatives would eventually sustain and improve on her strong relations with Africa in these turbulent socio-economic times,” portions of the article read.