Lusaka ~ Sat, 26 Sept 2020
It’s been almost a year since the COVID-19 pandemic hit the world, throwing global economies into disarray. Borders closed, flights suspended, major companies closed, copper prices tumbled, trade was simply disturbed in a very big way – in short, many economies got some good beating and many almost ceased to function.
The worst affected by this situation are African countries like Zambia, whose largest share of revenues are dependent on copper exports and other non-traditional products that cross the borders. Their small economies are now being made to balance up between fighting COVID-19, managing key sectors of the economy while at the same time meeting foreign debt obligations, using the same limited resources that dwindled even further due to reduced revenues. For Zambia specifically, this has put a huge strain on the Treasury, with leaders having to go through painful, sleepless nights about how the balancing act will be implemented while the debt obligations are staring right in Zambia’s eyes. The only option is to seek suspension of interest payments of the Eurobond, to restrategise payments.
Reality is that the gravity of the damage that the Coronavirus pandemic has caused on fragile African economies is quite humongous and getting clear by the day. It’s not a problem for Zambia alone – Angola, Chad, Ghana and Kenya, among others, are facing similar challenges.
Chad has asked to postpone debt repayments to Glencore and other private creditors while Kenya, a country whose economy is seen to be more advanced than Zambia’s, is also at risk of debt distress.
Let’s talk about Angola, a rich in oil! It is equally facing debt distress but has assured that it will honor its obligations. Ghana, on the other hand, is spending about half of its resources paying back debts, a situation worsened by the Coronavirus.
What we must not ignore is the fact that most African countries are heavily reliant on natural resources but the Coronavirus has slashed prices of the commodities they export to the global market. For example, oil from Angola and copper from Zambia have seen slowed economic activity.
International Monetary Fund data shows that more than a third of African countries are either in debt distress or are approaching it. This is the situation we’re in right now. It’s not a problem of Zambia alone – many countries are in debt distress and debt cancellation will be the only guaranteed way of saving struggling economies from total collapse.