Moratorium on the debt of African countries: on the continent, opinions are divided

Text by: RFI Follow

While the IMF confirms that Africa will be in recession this year, the major creditors have made a gesture: they are freezing debt service for a group of 76 countries, including forty African countries, which will allow them to devote their budgetary resources to support their economy. A moratorium therefore, which does not mean a cancellation. On the continent, the decision is welcomed but also raises reservations and disappointments.

Publicity

For these 76 countries the repayments this year represent 32 billion dollars: 12 billion held by the States, 8 billion by the private creditors - those there will be frozen - and 12 billion in the hands of international institutions, mainly the World Bank, will make them also the subject of a moratorium, if one believes the declarations of intention of the president of the World Bank.

► Read also: debts of African countries: major creditors agree on a moratorium

France wanted to cancel the debt of African countries. For now, it has obtained a moratorium from the Paris club (the lending countries) and the G20.

The debts of African countries today peak at $ 365 billion, a figure produced before the coronavirus crisis. Among the main creditors: China, 40% of the total amount, the Paris Club rich countries, the IMF, the World Bank, but also many private creditors, companies or fund managers.

Disappointed expectations

In Africa, finance ministers, meeting on March 19 by videoconference , had called for a suspension of the payment of interest on debts for the year 2020 - or 44 billion dollars - in order to be able to fight the coronavirus and its economic consequences.

They also called for a moratorium on the interests and principal of the debts of " fragile " African nations. The agreement obtained by France is therefore below their expectations.

A moratorium is not enough, estimates the Senegalese economist and researcher Moussa Demba Dembélé: “ The moratorium means for the moment we suspend payment, but you owe this debt in the near future; which means that the burden will still be there. And it is not obvious that in the near future, in two years, in three years, that African countries will have the means to pay this debt. And especially that for some creditors, this moratorium risks being accompanied by penalties. "

The Senegalese researcher recalls: “ President Macky Sall had asked for the outright cancellation of the debt. It is a measure that is both urgent and legitimate to allow African countries to use the resources that should go to service this debt to fight this pandemic. A sentiment shared by many actors in civil society.

However, this announcement will not solve the problems, notes Broulaye Bagayoko, permanent secretary of the Committee for the cancellation of illegitimate debts in Africa, CADTM Africa: " For them, the moratorium is to wait for the end of the coronavirus crisis . When they do that, it is to give countries time to be able to get through the coronavirus crisis and thereafter, there will be an African debt plan, it is not at all a solution for us. "

Anything that allows Africa to free up an immediate budget to respond to the coronavirus crisis goes in the right direction, believes Messie Komlan, the secretary general of the West African Civil Society Forum, FOSCAO - an organization under created by the Cédéao: “ My grandfather says that to eat an elephant, you have to cut it into small pieces; so you have to go step by step, and we think it's a good first step and we keep pushing for outright cancellation. "

Messiah Komlan indeed hopes for a cancellation or, at the very least, a real renegotiation of African debts, and in particular the exorbitant interest rates charged by certain creditors.

Solving “structural problems” of states

So will the debt cancellation of African countries be difficult to achieve?

" The principle is simple: creditors waive their claims, " poses Togolese economist Kako Nubokpo. For this former minister and dean of the University of Lomé, the devil is in the details. " We must distinguish public debt from private debt, " he explains. “ On the public debt, the States can be on the front line and therefore cancel the debt. But for private debts, it is the small holders in general, therefore much more difficult to implement. "

Faced with the Covid-19 crisis, it is very important that there be aid for Africa, adds this former minister: " Africa today has a deficit of 66 billion dollars compared to the financing of its health. And so compared to the Covid-19 crisis, it is important that there is help. The difficulty with debt cancellation is that there is a premium for bad students. Those who mismanage their economy, while other countries are doing a lot of work to clean up their public finances. Just look at the aid to GDP ratios in Africa. We have doubled the debt in ten years in Africa, we have gone from 30% to 60% of GDP today. So until we have a structural answer to African problems, we will find ourselves every ten years in debt cancellation. "

Kako Nubokpo, Togolese economist

RFI

What about China?

In ten years, African public debt has grown to reach the historic level of $ 365 billion, to the point that the World Bank sounded the alarm in 2018.

To make matters worse, African debt is fragmented. Indeed, of this 365 billion, 145 are due to China, while the rest is divided between eurobonds or even private debts.

The effort of Europe and the international financial institutions will be in vain if China is not ready to give up more durably to recover what it has lent to Africa, recently worried the Pan-African women, a network of journalists women representing the 54 countries of the African continent.

" China is an observer at the Paris club ," recalls the Togolese economist Kako Nubokpo. " China should join the Paris club and continue the discussions it has already started with the IMF so that we can find solutions that leave no one on the side of the road, " he added.

China has supported the Paris club initiative - although it is not one of them. The approval of this moratorium should therefore be a formality hope several financial experts from the continent.

"This crisis is an economic stroke"

Africa must now rethink its debt strategy vis-à-vis the outside world, according to Cédric Achille Mbeng Mezui, finance expert and member of the Finance Africa think tank.

What is needed at the level of African states is to go together to discuss the conditions because a moratorium, alleviation, staggering or cancellation will not have the same implications, he adds: " The states must look at the reality of their macro condition and see in which framework they can negotiate to give a little oxygen to face this crisis. And for states to maintain their credibility, it must, he adds, honor debt service, but do it in a normal framework. " This is the time to rethink debt strategies vis-à-vis the outside, " concludes this specialist in financial markets.

Newsletter With the Daily Newsletter, find the headlines directly in your mailbox

Follow all international news by downloading the RFI application

• Africa
• Coronavirus
• world Bank
• IMF
• Finance

On the same subject

Debts of African countries: major creditors agree on a moratorium

Explanation

Coronavirus: Emmanuel Macron in turn calls to “cancel” the debts of African countries