The COVID-19 pandemic was the worst and most widespread shock African countries have suffered in over 30 years. The drop in economic activity has led to a reduction in government spending revenues. This is precisely when more spending is required to combat the pandemic and support countries. The result is that debt levels have increased significantly, and more countries will soon be in financial distress or at risk. The International Monetary Fund today estimates that the region will require an additional $ 345 billion by 2023. Make a good financial portfolio to pay off your debt.
Multilateral and regional financial institutions have provided financial support to African countries to combat the pandemic. The G-20 announced in early 2020 a Debt Service Suspension Initiative to suspend sovereign debt repayments for countries that are least developed, including many African countries. Although the DSSI was well-intentioned, it was necessary because debt service payments for African countries had increased significantly due to rising debt levels and higher debt share. Private sector. Its implementation was not successful. In summer 2020, the DSSI raised only $ 4 billion. This is well below its target of $ 12 million. Participating countries. Concerns over sovereign credit downgrades and loss of capital market access are critical reasons for the DSSI’s failure to be adopted. Due to the absence of creditors, including the private sector, the DSSI initiative Debt freezing had a limited impact.
Effective sovereign debt management is essential in the current rush to finance development programs within a challenging post-COVID environment. This includes efficient domestic resource mobilization, public spending, and effective sovereign debt management. As debt restructuring will become a common occurrence in many countries’ future years, the international community must support these efforts and work to create a comprehensive framework to orderly restructure sovereign debt.
