Africa faces severe debt crises, UN warns

The United Nations has said African countries need strong policies and further support from the international community to avert a debt crisis and protracted low growth.

In a statement issued by the UN Department of Global Communications, the global body warned of the devastating socio-economic impact of COVID-19.

The report was jointly signed by Devi Palanivelu, UN Department of Global Communications; and Helen Rosengren, UN Department of Economic and Social Affairs.

The UN said that despite the relatively few number of cases compared to the number of cases in other continents, the COVID-19 pandemic would continue to strongly impact on living conditions and development progress in Africa.

It said the crisis was already increasing unemployment, poverty and inequality, such that most countries were already facing enormous challenges to keep the pandemic under control and mobilize financial resources to support health systems, protect vulnerable groups, and support the recovery.

The UN also projected that a strong and sustained recovery remained uncertain, amid power shortages, elevated public debt and policy challenges.

Also, meagre growth prospects meant less capacity to sustain debt levels, as foreign reserves, remittances and capital flows falter and depreciations constrain the capacity to service foreign currency-denominated debts.

The UN also said that African countries needed further support from the international community and strong national efforts in averting a debt crisis, which would not just cause a further economic deterioration, but also force painful fiscal adjustments.

Against such a backdrop, the report warned that social unrest and political tensions may easily escalate, which could, in turn, worsen food insecurity, violence, internal displacement and migration pressures.

Hamid Rashid, Chief of the Global Economic Monitoring Branch at the UN Department of Economic and Social Affairs, and the lead author of the report, said that Africa was in need of a sustained revival of growth.

“While a focus on the short term is essential, African countries need to lay the groundwork for a strong and inclusive development path in the medium term, which entails the creation of decent jobs at a large scale.

The report also highlighted the need for African countries to prioritise the diffusion of digital technologies; supported by the expansion of affordable and universal digital infrastructure.

It added that an effective framework for the implementation of the African Continental Free Trade Area (AfCFTA) could also become a major tool for promoting intra-African trade, food security and productivity.