Be Smart About South Africa

The Case for Postponing Africa’s International Debts

There’s been much coverage in recent weeks about the need for developing countries, particularly in Sub-Saharan Africa, to seek debt relief from the multilaterals like World Bank, IMF and other creditors. Rather than ask to completely replay the 1990s when some of the world’s low- and low-middle income countries negotiated debt forgiveness from the Paris Club coalition of some of the world’s wealthy countries, this time the discussions have been about pausing repayments on debt that has been been accumulated over the last decade of relatively cheap credit. The idea is if these countries can pause debt repayments for two years they’ll be able to focus on their much more challenging immediate problems of coping with a health crisis which has the potential to be easily exacerbated by the weak health infrastructure such as a lack of hospitals to medical personnel in many Sub-Saharan Africa countries. “Because Sub-Saharan Africa governments do not have the resources for significant fiscal stimulus programs, we think suspending governments’ interest payments is critical,” says Yvonne Mhango, an analyst at Renaissance Capital. “Ghana spends five times as much on interest payments as it does on healthcare. Freeing up these funds would help alleviate the impact of the crisis.” Mhango also points out Nigeria spends three times and Kenya two times their respective healthcare budgets on debt repayments.


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