African countries need more capital as they work to shore up their “bleeding” economies as a result of the COVID-19 crisis, and that support can come in many forms: debt suspension and restructuring, more multilateral financing, and a liquidity and sustainability initiative, according to Vera Songwe, executive secretary at the United Nations Economic Commission for Africa.
“On the economic front, Africa is bleeding,” Songwe told Devex President and Editor-in-Chief Raj Kumar in an interview. “The longer … the crisis takes, the longer it takes for our economies to reopen fully, the more painful it’s going to get. And then we will start seeing some unraveling of our economies.”
The cost of borrowing for African countries is many magnitudes higher than for the world's richest countries, often because of perceived risks, but Songwe is advocating for an initiative that would help level the playing field and build some of the financial infrastructure that the richest countries have used to stabilize their economies in the wake of the pandemic.
While debt discussions are critical, African countries still need to be able to turn to private capital markets to access financing, something made harder by COVID-19. That is why Songwe and others on the African continent are pushing for the Group of 20 leading nations to support the Liquidity and Sustainability Facility, which would lower borrowing costs for governments and give them access to funding to make it through the crisis.
For more interviews with leaders on COVID-19, watch:
• Habitat's Jonathan Reckford on COVID-19 and global housing
• Africa’s fintech trends accelerate due to COVID-19
• Gilbert Houngbo on food security and COVID-19
• Bertrand Badré on the pandemic's effect on impact investing