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Africa’s debt burden: Why COVID-19 may kill millions in Africa

by newshubmag

By Hon. Dayo Israel

Two hundred former heads of states, academics, and scientists sent to the G-20 have called for the temporary suspension of debt repayments across the world, including $44 billion for African nations, in a letter to the G-20. But this is not enough to stop what could become the worst loss of life since the Second World War.

Imperial College modelers have warned that a delayed response will cost 4 million lives in sub-Saharan Africa and Asia. Urgent action could reduce the death rate but would not prevent the deaths of a projected 800,000 people.

Yet, the world’s poor find themselves caught between a rock and a hard place. Urgent action to contain and mitigate the spread of the virus might help prevent deaths from the pandemic, but it will exponentially worsen other risks. The modelers have not considered the devastating economic impacts of social distancing in poorer countries.

Last week, the charity Action Against Hunger warned that the very restrictions we urgently need to prevent COVID-19 deaths will endanger millions of children across Africa and Asia, who are already experiencing food crises as a result of poverty, climate change, and conflict.

In these regions, many children and parents must work, yet barely earn enough to survive. As both are forced to stop working under lockdown conditions, with welfare systems already strained to the brink, millions of families will fall into deeper levels of poverty and hunger. And lack of water and sanitation means they will face risks that those living in industrialized countries cannot even imagine.

This means the world’s poor are currently faced with an unmitigated catastrophe: many millions of deaths due to the pandemic, or many millions of deaths due to the lockdown. COVID-19 has thus exposed the stark global divide between rich and poor in a way that no crisis has done before.

There is only one way to help nations in Africa overcome this double bind: and that is to write-off the huge and unrelenting debt burden they have built up under decades of Western-financed structural adjustment packages that have enforced austerity at the expense of the most vulnerable.

For decades, the standard Western development model was premised on these countries slashing state expenditures, including on healthcare, while deregulating and privatizing public infrastructure. It is largely foreign investors and companies who have profited from this opening up of poorer countries.

Meanwhile, while promoting “free markets” abroad, Western governments often apply the double standards of protectionism and tariffs for their own enterprises, such as agriculture. This is not a true free market, but an unequal playing field that has forced developing countries onto a path of intensifying debt and dependence on more powerful Western economies.

The IMF and World Bank now call for urgent suspension of debt payments for our countries, that is welcome — but insufficient to prevent the coming crisis. Firstly, we need a comprehensive debt jubilee based on not merely canceling the payments, but writing off the debt.

Secondly, even the debt jubilee is just the beginning. We require a global economic reset in which Western nations take the lead in putting an end to their protectionism. Both the United States and the European Union have been guilty of privileging their own domestic agriculture in a way that damages African producers and undermines consumer choices.

The U.S. trade war with China may not have targeted Africa, but its indirect impact on commodity prices and reduced demand for African raw materials has been devastating. Now, President Trump plans to scupper the Africa Growth Opportunity Act, which would provide 39 African nations duty-free access to the U.S. for some 6,500 products.

Meanwhile, the EU’s Common Agricultural Policy, which comprises half the EU budget, lavishes subsidies on large EU landowners, allowing the EU to dump food into Africa, where local producers cannot export their products. Although the average applied EU tariff on Africa might seem low at 8.7%, other obstacles increase the cost of Africa’s trade almost fourfold.

Similarly, the EU’s ban on palm oil for biodiesel penalizes developing nations, from smaller producers like Ghana to larger ones like Malaysia. Although justified as a means of stopping deforestation, the ban in reality functions to protect EU oilseeds such as rapeseed and sunflower — which, if they replace palm oil, would only make deforestation far worse. Worse, the EU is also refusing to support the pioneering efforts of developing countries like Malaysia to transition to 100% sustainable palm oil.

This underscores the third element of economic reset: International institutions, governments, and banks should look to providing interest-free loans facilities to developing nations to help them rapidly upscale their healthcare facilities. This can be supported by an emergency global fund for productive investment.

Addressing the COVID-19 crisis, in short, requires a new global partnership. True resilience will come not from nations fending solely for themselves, but from all nations working together.

Dayo Israel is an executive board member of the Commonwealth Africa Initiative and a permanent member of the Lagos SUBEB.

This article was originally published in The Washington Examiner.

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