World Bank considers debt relief for Africa to fight COVID-19

The World Bank has recently released a report predicting that Sub-Saharan Africa is set to experience its first recession in 25 years due to the economic impacts of the COVID-19 pandemic. The region is expected to lose up to $79 billion in output as a result of the crisis, highlighting the severe consequences of the virus on African economies. In a recent interview with CNBC Africa, Albert Zufak, the World Bank's Chief Economist for Africa, shed light on the current situation and the urgent need for debt relief to help African countries combat the pandemic effectively. Zufak explained that despite the delayed arrival of the virus on the continent, African economies are already feeling the repercussions in various sectors such as tourism and transport. High-frequency data suggests a significant impact on financial markets and the rapid spread of the virus in countries like Zambia and Ghana. The World Bank projections indicate a decline in growth from 2.4 percent in 2019 to a range of -2 to -5 percent for 2020, depending on the duration of the crisis. This decline in growth will not only affect the economy but also have a detrimental effect on household welfare, with a potential decrease of 7 to 10 percent across Africa. With limited fiscal space and a need for urgent economic stimulus of around $100 billion, African countries are facing challenges in responding effectively to the crisis. Many countries in the region are already burdened with high levels of debt, with some spending over 60% of their revenues on debt servicing alone. Zufak emphasized the critical need for temporary debt relief, known as a debt standstill, to alleviate the financial strain caused by the pandemic. Both the World Bank and IMF are advocating for debt relief as part of the global response to COVID-19 in Africa. The discussion around debt relief involves key stakeholders such as the African Union, the World Bank, IMF, and other regional institutions engaging with creditors to find a viable solution. While there is no specific timeline for when African governments will receive relief on debt payments, the dialogue is ongoing to address the urgent needs of the continent. Zufak highlighted the importance of including all countries, including those under sanctions, in the global response to prevent further escalation of the crisis. In the case of countries like Zimbabwe, which are facing sanctions and struggling to access funding for COVID-19 response, Zufak stressed the necessity of ensuring equal access to financial assistance for all nations. The private sector also plays a crucial role in providing support at affordable rates to facilitate repayment in the long run. As the world battles the pandemic collectively, cooperation among all stakeholders is deemed essential to overcome the challenges presented by COVID-19 in Africa. The call for debt relief and financial assistance echoes the urgent need for a coordinated effort to mitigate the economic fallout of the pandemic and safeguard the well-being of African nations. As the World Bank continues to advocate for relief measures, the global community must come together to support African countries in their fight against COVID-19.