Opinion | More is needed to help less-developed nations weather Covid-19 storm

The G20 agreement to suspend debt repayments from the world’s poorest countries is important, but tougher measures are needed so that the pandemic’s economic impact is not just pushed to another time

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Wealthier Western countries are considering how to ease lockdown restrictions and start taking gradual steps toward reviving business and daily life. But many developing countries, particularly in the Middle East and Africa, can hardly afford the luxury of any misstep. Photo: AP

Published: 9:26pm, 18 Apr 2020Updated: 9:26pm, 18 Apr 2020

The world’s poorest countries spend more on debt repayments than public health. With the coronavirus still spreading and uncertainty about when the pandemic will peak, the agreement by the Group of 20 biggest economies to a suspension until the end of the year is an important first step. Many vulnerable nations, mostly in Africa, will be better able to channel resources towards health care and the economic impact. But more is needed and the World Bank, International Monetary Fund and private lenders and aid donors hold the key to weathering what some are predicting could be the deepest recession since the great depression of the 1930s.

Waving loan repayments will enable billions of dollars to be put towards fighting Covid-19. Wealthy nations are still struggling with the pandemic, so have been paying little attention to the difficulties of the least developed countries. With fragile health systems that lack medical facilities and staff, equipment and preventative gear, most debt-ridden governments had no choice but to resort to an early, aggressive strategy of border and transport shutdowns and community lockdowns. Economies have been shuttered, leading to sharp falls in revenue from activities like tourism, mining and manufacturing that directly impact employment and currency flows.

For many, especially in Africa, China has been the best, and preferred, lifeline. The government, state-run enterprises and private companies, in a highly visible approach, have been providing massive amounts of funds, equipment and expertise since March. Earlier this month, almost 38 tonnes of medical supplies arrived in Ghana courtesy of Beijing for distribution to West Africa. The finance ministry welcomed the G20 pledge and said China, the biggest lender to many poorer nations, would make its contribution to the debt relief measures, allaying concerns that it would approach the issue bilaterally rather than through coordinated means.

Although China is the first major nation to begin recovering from the outbreak, it cannot claim to have beaten it. The fullest alert is necessary as returning Chinese workers from Africa and elsewhere could bring back infections. Beijing’s goodwill could also be dampened by criticism of the way Africans in Guangzhou have been treated. It is in China’s every interest that it uses its knowledge and resources to tackle the disease in other countries, contribute to finding a cure and developing a vaccine and in doing so, soften the global economic impact.

But China cannot do the task alone. Nor does delaying debt repayments by a few years resolve the economic impact for less-developed countries; that is merely pushing the problem to another time. Tougher measures are needed and bilateral, multilateral and private creditors should consider lowering or even cancelling loans.