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Covid-19 Brings Africa’s Debt Problems into Sharp Focus

The unprecedented shock of Covid-19 has sent revenues plummeting at exactly the moment when governments need to be spending more. The immediate effect will be a squeeze on essential services and investment. In the tough years ahead, heavy debt burdens could push inflation up and pull growth down. Suppliers sink when the government stops paying its bills, and trade slows with uncertainty. Africa’s debt burden suddenly looms larger. In mid-April the G20 announced a suspension of bilateral debt payments for 73 of the poorest countries, half of them in Africa. The moratorium brought respite until the end of the year. But many argued it did not go far enough. The IMF says the economies of sub-Saharan Africa will shrink by 1.6% this year, the worst performance on record; in most of North Africa the decline will be even steeper. And interest payments make it harder to fight the virus: even before the pandemic, 32 African governments were spending more on external debt servicing than on healthcare, calculates the Jubilee Debt Campaign, a UK-based advocacy group.