The Sunday Mail
Enacy Mapakame
The World Bank says sub-Saharan Africa needs some form of debt relief from bilateral creditors in the face of an economic downturn, as growth is seen falling in what will be the region’s first recession in 25 years due to the coronavirus (Covid-19) pandemic.
This comes as the region’s economic growth is forecast to fall sharply from 2,4 percent in 2019 to between -2,1 percent and -5,1 percent in 2020.
According to the World Bank’s latest Africa’s Pulse, a twice yearly economic update, the region will be heavily constrained this year by reduced production, limited importation and disturbances to the tourism sector as well as other effects of the global pandemic.
Real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies — Nigeria, Angola, and South Africa — as a result of persistently weak growth and investment.
Oil-exporting countries will also be hard-hit while growth is also expected to weaken substantially in the two fastest growing areas — the West African Economic and Monetary Union and the East African Community — due to weak external demand, disruptions to supply chains and domestic production.
As such, customised solutions are needed that reflect the nature of the African economies, which are largely informal and driven by the small to medium enterprises (SMEs). In Zimbabwe, for instance, SMEs play a critical role in the economy, employing over half of the employable population.
The report indicates policy makers face peculiar constraints, particularly the deteriorating fiscal positions and heightened public debt vulnerabilities, and the overall low operational capacity to respond.
“The immediate measures are important but there is no doubt there will be need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight Covid-19 and to help manage or maintain macroeconomic stability in the region,” said lead economist and lead author of the report, Cesar Calderon.
The report also highlights the need to take actions that minimise disruptions to food supply chains and social protection programmes, focus on saving lives by strengthening health systems, implementing social protection programmes including cash transfers, food distribution and fee waivers to support citizens.
Those in the informal sector are the hardest hit and require support.
According to the Pulse, agriculture is also expected to significantly contract due to disturbances caused by the pandemic and driving the region into severe hunger.
Agriculture production is seen contracting by between 2,6 percent in an optimistic scenario and up to 7 percent if there are trade blockages.
Food imports will also decline substantially (as much as 25 percent or as little as 13 percent) due to a combination of higher transaction costs and reduced domestic demand.
In terms of monetary loss, Covid-19 will cost the region between US$37 billion and US$79 billion in output losses for 2020 due to a combination of effects.
These include trade and value chain disruption, which impacts commodity exporters and countries with strong value chain participation; reduced foreign financing flows from remittances, tourism, foreign direct investment, foreign aid, combined with capital flight; and through direct impacts on health systems, and disruptions caused by containment measures and the public response.
“The Covid-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard,” said World Bank Vice President for Africa Hafez Ghanem.
“We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term — including calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with Covid-19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security,” he said.
Covid-19 was first detected in China late last year and was declared a global pandemic in March this year by the World Health Organisation (WHO).
Due to the severity of the pandemic, countries have implemented national lockdowns with the exception of essential services as part of efforts to limit its spread.
While Zimbabwe and other African countries have also taken such measures to curb further spread of the virus, the Pulse outlines several factors that pose challenges to the containment and mitigation measures, in particular the large and densely populated urban informal settlements, poor access to safe water and sanitation facilities, and fragile health systems.
