President Cyril Ramaphosa told fellow heads of state and dignitaries from around the world on Wednesday afternoon that African states and other developing economies would need their debt obligations suspended if they hoped to fight the impact of the coronavirus pandemic and revive their economies.
Speaking during a virtual roundtable discussion hosted by the United Nations on Financing for development in the era of Covid-19 and beyond, Ramaphosa said African states especially needed a fair and equitable regime to allow room for leaders to address the health and economic crisis.
The G20 has been discussing the possibility of a "debt standstill" for vulnerable economies since April, as each country grapples with the Covid-19 novel coronavirus. According to the World Bank, some creditors are committing to honour the proposal to put a hold on debt obligations.
In April, chief economist for the Africa region at the World Bank, Albert Zeufack, said a "debt freeze" for African economies could free up $44 billion to respond to Covid-19.
Also speaking in his capacity as African Union chair, Ramaphosa told fellow heads of state during the virtual round table that a "standstill" in debt to international creditors would give African states the room to fight the pandemic, import medical supplies if needed and invest in economic recovery.
"South Africa supports the call from the African Union for a debt standstill for two years. We also support the call for drawing rights for corporate banks to extend the impact of the pandemic. This should come with a standstill of debt for vulnerable countries," said Ramaphosa.
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Ramaphosa said the most vulnerable economies of the world would need a relief package equal to 10% of global GDP. He said leaders must be innovative in the deployment of resources towards fighting Covid-19 as well as advancing sustainable development.
World Bank President David Malpass said more countries and creditors were signing up for a debt moratorium, noting that Chinese president Xi Jinping has expressed intention to commit to the debt suspension.
Building a bridge
Managing Director of the International Monetary Fund Kristalina Georgieva said while the world economy was bound to exit 2020 smaller that it was when it entered, heads of state and central banks were doing critical work to prevent the worst possible economic fallouts.
"Fiscal measures must continue to build the bridge over the financial support for workers and SMMEs. So far, we have seen as much as $9 trillion in fiscal measures announced and more will have to be done," said Georgieva.
Georgieva said the most vulnerable countries include those that are mineral dependent, those that depend heavily on tourism, countries that receive high volumes of remittances and economies located in former conflict zones. She says they need debt sustainability, financial lifelines and improved conditions for private sector-led growth.
Former Credit Suisse CEO Tidjane Thaim said in some cases of African states grappling with Covid-19, debt cancellations may have to be considered as "at this time, capital must flow into Africa and not out of Africa".
President and Chief Executive Officer, Institute of International Finance Tim Adams said in sub-Saharan Africa, there were small groups of creditors that were dominating the debt market and that the institute supported debt suspension.
European Commission president Ursula von der Leyen challenged leaders to re-imagine the future of the global economy, saying before the pandemic the world was already on an unsustainable economic path, with growing inequality and illicit financial flows.
"We need a global recovery initiative that links investment and debt relief to the SDGs. We must be clear what kind of recovery we aspire to. It must be a green recovery. It must be a digital-based recovery and it must be a just recovery," said Von der Leyen.
Von der Leyen said the EU was committed to assisting African states, as evidenced in the more than €20 billion set aside for vulnerable states.