As reported by DW, various countries, particularly Zambia, have been racking up foreign debt over the past few years, and while the path to repayment has already been a long and tough one, the COVID-19 pandemic is not making it any easier.
Zambia is expected to grow over 120% of GDP by the end of the year. It owes about $3 billion in debt to just China and Chinese entities. This would already be a significant challenge to overcome even without the pandemic. Angola, the 5th largest African economy recently has received around €5.3 billion over the next few years from donors, but that still does not place them favorably.
DW writes, "According to the International Monetary Fund (IMF), African states need almost €410 billion to pay off all foreign debts due by 2023. ".
While not only does this seem bad from an economic standpoint, we also have to think of the individuals in these countries. What happens when the money for fighting the pandemic runs out? What happens when funding for schools and hospitals runs out?
Seeing how various international entities have been attempting to invest in various large African countries over the years, this can also have greater affects off the continent, such as in China who has heavily invested here. At this point, how could countries like those discussed be able to look for help, as so many foreign entities have been focused on containing this pandemic domestically and not helping abroad?
I think it would be wise for international organizations like the IMF to provide debt relief that isn't so reliant on austerity measures. Of course, if state run institutions are bloated or corrupt, more liberalizing reforms should be a condition of debt relief for African countries. However, the IMF's previous strategy of stipulating that African governments cut spending as a condition for debt relief could prove counterintuitive in the long run. Government spending is often necessary for financing infrastructure projects, healthcare, and education (all of which increase capital productivity). Once the worst of the pandemic is over, countries should recognize their interdependence and seek to aid the development of foreign countries, which is better for all parties in the long run, especially when compared to saddling these countries with unsustainable debt, then forcing austerity policies on them.
ReplyDeleteI really don't think they could help. Its beneficial to not only themselves but to everyone else if they just focus on the problem in their own country.
ReplyDeleteI agree with Spencer the IMF should step in and offer aid. But, this is a very difficult situation especially for these African countries. I think until a vaccine is accessible and foreign economies are back on their feet, there is very little that will actually be done to aid them.
ReplyDeleteThe IMF is the chance of hope for those countries. Other countries are still struggling themselves so its hard to help others even if they may be in a worse position. A vaccine I feel is the only hope at this point but the distribution to everyone will be difficult.
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