With the African Union now predicting the continent’s economy will contract by 0.8 percent this year, African finance ministers are scheduled to meet via video conference on Thursday to discuss ways countries can mitigate a looming economic disaster.
Researchers at the AU now believe the continent will slip into a recession this year due to the impact the coronavirus is currently having on trade, remittances, tourism and a huge fall in global oil prices.
An AU report seen by VOA estimates governments will lose around $270 billion from lost trade. The report, first published by Reuters, also says governments will need at least $130 billion in additional public spending to fight the virus.
François Conradie, senior political economist at NKC African Economics, a research firm in South Africa, said via a messaging app that African governments do not have much firepower to fight the impacts of COVID-19.
“The only thing we can do really — and that’s what these negotiations [on Thursday] are about — is to try and boost state spending capacity by organizing low interest loans from multilateral and maybe private lenders and then inject that money into the economy in the form of some sort of help," he said.
"We’re doing that in Africa by giving tax holidays to employees of minimum wage people to try and save those jobs. There is some other initiatives to make financing available at low interest to SMEs to try and get them on their feet. It’s the kind of thing that will help companies that are still viable but it won’t do anything for the companies that have seen their markets disappear,” said Conradie.
One big task for African finance ministers will be to convince institutions such as the International Monetary Fund and World Bank to suspend or even cancel some of the continent’s debt load. But, experts say, most of Africa’s debt is owed to private bondholders who may not have political or humanitarian considerations in mind when asked to cancel debt.
Yeo Dossina, head of the economic policy and research division at the AU, was asked what Africa can do to mitigate the economic impact of COVID-19. He spoke to VOA via a messaging app.
“You will see some measures already taken by member states, including from central banks. We’ve tried to narrow down the interest rate and also to provide liquidity to commercial banks so that we can also put some money in the treasury of enterprises. Also, there are some special measures that governments are taking to provide for vulnerable people with some resources so they can buy food to eat, and also to try and purchase medical material and products to persons that are now sick,” said Dossina.
Dossina added that remittances that are an average of $50 billion per year from the African diaspora have gone down since the coronavirus outbreak began.
On Thursday, he said, finance ministers will try and reach a common position on how much debt they want to see suspended or canceled.
African governments will also closely watch an OPEC meeting Thursday where members are to discuss oil production cuts that would help raise prices and help oil-dependent countries such as Nigeria, Angola and Gabon.
While the full effects of the virus still remain to be seen in Africa, cases are beginning to rise in countries such as Burkina Faso and Cameroon, where there are 345 and 650 coronavirus patients, respectively.