These were the words of Sudanese billionaire Mo Ibrahim, ‘‘Poor African nations should be allowed to borrow more from the International Monetary Fund’s reserves to help mitigate the economic impact of the coronavirus pandemic’’
“There’s a lot of goodwill but where is the beef?” Ibrahim said in an interview during the virtual Bloomberg Invest Conference on Wednesday. “We are here waiting for the IMF to deploy this very powerful tool they have, which is the Special Drawing Rights. That needs to be done.”
The IMF’s special drawing rights are supplementary foreign exchange reserve assets held by the lender. A proposed $500 billion SDR allocation was blocked in April by the lender’s biggest shareholder, the U.S.
The IMF was concerned about Africa’s high levels of public debt even before the coronavirus outbreak, with the continent’s government debt having doubled to about half of economic output since 2008. More than a third of African countries are approaching or already experiencing “debt distress” after a slowdown in commodity prices in 2014, according to the lender.
“The G-20 offered some relief but that’s for public debt and that’s really only for one year; it needs to be extended for one or two years,” he said. “We need more support to the private sector because it is under extreme pressure and we need the private sector because that is what generates jobs and that’s important to protect jobs.”
The G-20 approved a debt relief of about about $12 billion until the end of the year, and called on private creditors to step up. However, the specter of complex legal negotiations and potential lawsuits from bondholders would make any waiver on commercial debt very difficult. Even before the pandemic, many African countries were struggling with a rising debt burden stemming from investors’ appetite for their yields.
One of the main reasons African nations aren’t getting adequate financial support is due to the “global order” being out of kilter and the increasing lack of consensus on how to tackle the devastating impact of the coronavirus pandemic, Ibrahim said.
“The global order unfortunately is not functioning well,” he said. “Instead of coming together as the global community to face a global pandemic, we see sniping between the greater powers and it’s really unhelpful. We cannot defeat this virus in Europe if we don’t defeat it in Africa.”