African countries continue to weigh new debt relief options in the face of COVID-19
On Thursday, February 11, the United Nations Economic Commission for Africa (ECA) predicted that the economic damage inflicted by COVID-19 would prompt more African countries to pursue debt relief through a new common framework from the G -20 which relies on the IMF to negotiate debt reduction from private and public creditors, thereby helping countries alleviate the economic and financial pressures of the pandemic. At the start of the pandemic, the G-20 announced that it would implement a Debt Service Suspension Initiative (DSSI), suspending debt repayments of the sovereign debt of least developed countries until the end of 2020. The DSSI program has been extended until June 2021. So far, Chad, Ethiopia and Zambia have requested debt relief under the new G-20 common framework. In November, however, Zambia became the first African country to default on its debt since the start of the pandemic.
Along with heavy reliance on fossil fuels for government revenue, declining global oil demand and prices, and an unsustainable pre-COVID debt burden, the ECA stressed that pressure on public revenues in Africa is making some countries, such as Angola and the Republic of Congo, particularly vulnerable to the economic distress imposed by the pandemic. Bloomberg reports that in response to the potential debt restructuring and associated default fears, yields on Eurobonds issued by African governments have risen dramatically. In fact, Ethiopia’s announcement that it would seek to restructure its debt as part of the G-20 resulted in a sale of its Eurobonds, pushing its yield down by 2.62 percentage points from 6.52. % to 9.14%. In particular, not all experts agree on the extent of the negative impact of restructuring on sovereign debt financing: Vera Songwe, Executive Director of UNECA and senior non-resident member of the Brookings Africa Growth Initiative , does not see the rise in African Eurobond interest rates in response to participation in G-20 debt relief as an obstacle to their access to the sovereign debt issuance market. In correspondence with Bloomberg News, she says the high rate of return on Eurobonds issued by African states relative to the rest of the world still makes African Eurobonds attractive to investors.
The Brookings Africa Growth Initiative is closely monitoring African debt sustainability and COVID-19. For more on this issue, read “Debt Sustainability and Financing for Development: A Key Post-COVID Challenge”, “Africa Needs Debt Relief to Fight COVID-19” and “ COVID-19 and the Debt Status Quo for Africa: G-20 action is an important first step that needs to be completed, broadened and expanded.
Likewise, to learn more about Africa’s finances related to COVID-19, read “The unfinished agenda for financing Africa’s response to COVID-19” and “How to ensure that Africa has the necessary financial resources. to fight against COVID-19 ”
Food prices rise in response to rising commodity prices, currency depreciation and COVID-19 disruptions
Last month, according to the United Nations, food prices hit six-year highs in emerging markets, marking eight consecutive months of rising food prices. The Food and Agriculture Organization’s food price index, which tracks monthly changes in international prices for commonly traded food products, reached its highest level since July 2014, with peaks of over 5 percent in its grain price index, vegetable oil price index and sugar price index, from the previous month.
Food prices often rise alongside non-food price inflation, which is on the rise in Africa in general: According to Reuters, Nigeria has hit double-digit food price inflation in recent months. Namibia recorded food inflation rates of 7 percent and Seychelles at least 15 percent (almost 30 percent for fish). Angola has seen its annual inflation rate climb to 25%.
These increases in food prices will exacerbate food insecurity in the world according to the World Food Program. In 2020 alone, up to 96 million more people in 54 IDA countries were severely food insecure, bringing the total to 233 million people at the end of last year.
For a more in-depth look at how COVID-19 has affected the food security of African households, see “Numbers of the week: The effect of COVID-19 on food security and income in Africa”. For more on how COVID-19 has disrupted food supply chains, check out the June 2020 blog, “Economic impact of COVID-19: Protecting Africa’s food systems from farm to fork” . For strategies to secure food security during the pandemic, see “Protecting food security in Africa during COVID-19”.
South Africa Stops Deployment of AstraZeneca’s COVID-19 Vaccine
South African health officials announced on Sunday that they will suspend the rollout of AstraZeneca’s COVID-19 vaccine in the country following the results of a study by the South African University of the Witwatersrand which suggests the vaccine offered only “minimal protection” against mild and moderate forms of the novel coronavirus. strain B.1.351 (also known as variant 501Y.V2), increasingly the dominant strain in the country. The study, which has been subject to peer review and will be released soon, involved around 2,000 volunteers, about half of whom received the AstraZeneca vaccine and half received a placebo. Neighbor eSwatini said on Tuesday that he would also not use the AstraZeneca vaccine.
South Africa still plans to weigh the best use of the 1.5 million doses of the AstraZeneca vaccine previously acquired. Indeed, it is still unclear whether the vaccine will offer strong protection against severe forms of the disease resulting from the new variant, which accounts for 90 percent of new cases in South Africa. In the meantime, health officials are looking to roll out the Johnson & Johnson vaccine, which has been shown to be effective against the new variant and whose first batch of doses is expected in a few days. In particular, unlike other vaccines currently available, that of Johnson & Johnson requires only one injection instead of two weeks apart. South Africa has totaled nearly 1.5 million cases and more than 46,000 deaths since the start of the pandemic.
In response to the announcement of reduced effectiveness, the African Union announced that it would not “walk away” from AstraZeneca’s firing as only six other countries reported the variant.
Also this week, Zimbabwe acquired 800,000 doses of the Chinese Sinopharm vaccine, including 200,000 doses that China gave to Zimbabwe. The doses, which are expected to arrive next month, are a welcome relief for the African nation, which is just emerging from a second wave of cases. The second wave in Africa was felt across the continent. Air Namibia suspended operations and canceled all scheduled flights on Thursday, laying off its 600 employees.
