The economic damage wrought by the coronavirus pandemic will probably make many African countries seek debt restructuring from G-20 countries, according to the head of the United Nations Economic Commission for Africa, (UNECA) Vera Songwe.
Last month, Chad became the first country in the African continent to request relief under a Group of 20 initiative to help African countries cope with the economic fallout from the pandemic. Days later, Ethiopia applied, followed by Zambia, which last year became the first African country to default on its debt since the beginning of the pandemic.
Songwe said with government revenue taking strain because of the slowdown in economic growth, some countries are less equipped to meet the demands of their citizens.
She further said: “African countries don’t have the resilience buffers that we had in 2020.” “There probably will be more countries that will opt for the G-20 debt framework, because they need additional fiscal space to purchase vaccines.”
Angola and the Democratic Republic of Congo are particularly vulnerable to distress because they have high debt levels, severe economic declines and borrowed significant amounts from China using resource-backed loans, Verisk Maplecroft said in a research note last week.
The G-20 framework aims to bring creditors including China into an agreement to rework the debt of countries in danger of defaulting. China is Ethiopia’s biggest bilateral creditor, accounting for 23% of its total public debt burden of $27.8 billion, according to World Bank data.
Under the G-20 program, debtors are committed to seek similar terms of the resulting bilateral restructuring with private creditors. It’s unclear what that will mean for Eurobond-holders, said Songwe, who spent more than a decade at the World Bank before being appointed head of the UN body in 2017.
Last year, Ecuador restructured its debt with bondholders and China after updating its International Monetary Fund loan program.