A rising debt bill in Africa is wrestling away funds needed for infrastructure and dampening hopes of a speedy recovery from the economic fallout of the coronavirus pandemic.
South Africa won’t join collective negotiations with creditors to suspend or write off African nations’ debt, that’s according to an envoy for the country.
The World Bank and IMF have indicated they would negotiate with each country individually, according to SA’s envoy to the African Union.
However, Trevor Manuel a particular envoy to the African Union, pined that his nation’s position was complex because most of its debt is held locally.
“The majority of the debt is definitely held by South African pension funds,” .Once you enter into these kinds of agreements you might actually be compelled to say to South African pension funds, we are sorry but [we] can’t deal with your pensions.”Trevor Manuel
Some African governments are pushing for a moratorium to repay international creditors after coronavirus-induced lockdowns harmed their economies.
Most countries already spend more on servicing their debt than on critical areas, such as health and infrastructure, therefore if African leaders cannot revive their economies they will not just be living on borrowed money – they will be living on borrowed time too.
Cyril Ramaphosa who is South Africa’s president and also the chairperson of AU said in late May that the continent could get more than $200 billion in additional support after the UN called for a global response package for the virus.
That was After The World Bank warned in April that sub-Saharan Africa will suffer its first recession in 25 years, with gross domestic product in the region probably shrinking between 2.1% and 5.1% in 2020.
Credit rating agencies have warned that a restructuring of debt owed to private creditors could constitute a default, causing some governments to break a sweat over been shut out of debt markets.
During this Pandemic, African countries are the hardest hit in terms of economic damage, unlike richer countries that can afford to pour money into their economies.