Hardly anyone will want her job: Vera Daves, Angola’s finance minister. By the end of the year, the country’s gigantic mountain of debt is likely to have grown to over 120 percent of gross domestic product. Even in normal times that would be a huge challenge, now the corona pandemic is added. “Our first priority is to survive, to save as many lives as possible, and to keep the health system from collapsing. Then we want to achieve sustainable debt levels,” Daves said in October.
A first step has been taken: Foreign donors have promised Angola debt relief of around 5.3 billion euros over the next few years. This means that Africa’s fifth largest economy is just as little over the top as many other countries on the continent. According to the International Monetary Fund, African countries need just under 410 billion euros to pay off all foreign debts due by 2023.
No money for schools and hospitals
Nobody wants to imagine what else will happen. “States would stop fulfilling elementary functions: security, education, health care. Which ultimately means that many people no longer see a future in their home country,” warns Jürgen Kaiser from the development policy network erlassjahr.de in an interview with DW.
Oil-rich Angola is also in crisis
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But even now some states are groaning under the burden of debt and the repayments due. It hits the poor especially hard. The economy collapsed in many places due to the corona pandemic. Especially the poorest have no reserves and in many places there are no state social benefits. “If we had to pay our debts, the situation would be really difficult,” Adriano Nuvunga from the civil society network FMO in Mozambique told DW. “Because we need funds to support the poorest of the poor. Since Corona began, they have not received any support.”
While Mozambique slipped into a debt crisis due to corruption scandals worth billions, the liabilities of other countries grew for another reason: With comparatively cheap money, borrowed on the capital markets or from China, they financed gigantic infrastructure projects: roads, bridges, railways.
Everything different through Corona
They wanted to repay the loans by selling natural resources. But then Corona came. “We have an important factor that affects countries like Angola, Gabon or the Republic of the Congo – that is the drop in the price of oil,” says expert Kaiser.
African countries invested gigantic sums in infrastructure
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Take Gabon, for example: In the current budget, Finance Minister Jean-Marie Ogandaga had calculated economic growth of five percent and an oil price of 57 US dollars per barrel. Now he expects the economy to grow by a maximum of 0.5 percent in 2020 – at an oil price of $ 26. “If you suddenly only get half your salary, you can’t just go on paying your debts as if nothing were wrong,” was his laconic comment in May.
Therefore, others should step in: The International Monetary Fund (IMF) and World Bank have already promised some countries aid. The group of the 20 leading industrialized and emerging countries (G20) allows 73 particularly highly indebted countries to suspend repayments until the end of June 2021. But the initiative is only a first step. “The moratorium helps a lot, but it only postpones payments. Some countries need substantial debt relief,” World Bank boss David Malpass told DW in October.
Jürgen Kaiser calls for private donors to be included as well
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Private donors are another problem: some African countries have borrowed large sums of money in the global financial markets in recent years. Now they have to laboriously pay off the loans. An estimated EUR 18 billion in repayments to private creditors will be due next year. In contrast to public donors, however, there are still no signals that private donors are also ready to make debt cuts. “As a taxpayer, I don’t want to accept any waivers so that Blackrock and Deutsche Bank can continue to cash in,” says Jürgen Kaiser from erlassjahr.de.
Is the turning point coming?
Hopes now rest on the G20: the finance ministers of the most important industrialized and emerging countries want to discuss debt relief for particularly troubled countries at their meeting on November 13. They had already developed a corresponding procedure in October. Only a few details are known yet. According to media reports, however, an important demand made by experts and civil society should be met: in future, debt relief initiatives should include all donors – Western states, China, but also private creditors. A possible candidate for this procedure: Zambia, which had to ask its creditors to postpone payments back in October.
Assistance: Leonel Matias (Maputo)
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