By Hamilton Nwosa(Head, The New Diplomat’s Business and data tracking desk)
Nigeria, South Africa, Ghana and other African countries are projected to lose between $22.1billion and $88.3 billion in GDP as a direct consequence of the coronavirus outbreak in Africa. The African Development Bank (ADB) which dropped the hint today came up with shocking forecast that the impact of Covid-19 may be crippling on Africa with a likely loss of between $22.1 billion and $88.3 billion, in the worst case scenario, in GDP.
President of the ADB, Dr Akinwumi Adesina in a statement e-mailed to The New Diplomat said “these are very difficult days, as the world faces one of its worst challenges ever: the novel coronavirus pandemic’’, stressing that no nation seems spared as infection rates rise, so does panic across financial markets, as economies drastically slow down and supply chains are severely disrupted.
According to Adesina, a one-time Nigeria’s minister of Agriculture, “ extraordinary times call for extraordinary measures. As such, it can no longer be business as usual. ”While canvassing social distancing, he however maintains that times like this do not call for financial distancing as such measures would wreck many developing African economies that are so fragile with heavy dependency on commodity export.
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He said: “The Covid-19 shock will further squeeze fiscal space in the continent as deficits are estimated to widen by 3.5 to 4.9 percentage points, increasing Africa’s financing gap by an additional $110 to $154 billion in 2020.
“Our estimates indicate that Africa’s total public debt could increase, under the base case scenario, from $1.86 trillion at the end of 2019 to over $2 trillion in 2020, compared to $1.9 trillion projected in a ‘no pandemic’ scenario. According to a March 2020 Bank report, these figures could reach $2.1 trillion in 2020 under the worst case scenario”.
“This, therefore, is a time for bold actions. We should temporarily defer the debt owed to multilateral development banks and international financial institutions. This can be done by re-profiling loans to create fiscal space for countries to deal with this crisis.
“The Covid-19 shock will further squeeze fiscal space in the continent as deficits are estimated to widen by 3.5 to 4.9 percentage points, increasing Africa’s financing gap by an additional $110 to $154 billion in 2020. ”
He added: ‘’Today, the already stretched systems as noted in the 2019 Global Health Security Index will find it difficult to face up to a clear and present danger that now threatens our collective existence. Only those that are alive can pay back debts.
“Sanctions work against economies but not against the virus. If countries that are under sanctions are unable to respond and provide critical care for their citizens or protect them, then the virus will soon “sanction” the world. In my Yoruba language, there is a saying. “Be careful when you throw stones in the open market. It may hit a member of your family.”
“That’s why I also strongly support the call by the UN Secretary-General that debts of low-income countries be suspended in these fast-moving and uncertain times.
But I call for even bolder actions, and there are several reasons for doing so.
“First, the economies of developing countries, despite years of great progress, remain extremely fragile and ill equipped to deal with this pandemic. They are more likely to be buried with the heavy fiscal pressure they now face with the coronavirus.
“Second, many of the countries in Africa depend on commodities for export earnings. The collapse of oil prices has thrown African economies into distress. According the AFDB’s 2020 Africa Economic Outlook, they simply are not able to meet budgets as planned under pre-coronavirus oil price benchmarks. The impact has been immediate in the oil and gas sector, as noted in a recent CNN news analysis.
“In the current environment, we can anticipate an acute shortage of buyers who, for understandable reasons, will reallocate resources to addressing the Covid-19 pandemic. African countries that depend on tourism receipts as a key source of revenue are also in a straightjacket. ”
.Read Dr Akinwumi Adesina’s full article on our Opinion section
