AfDB to defer private sector debts on COVID-19 recession fears, says continent may need over $154b support

To cushion the impact of global recession, Africa Development Bank (AfDB) will defer private sector debt repayment for organisations in need of emergency liquidity facility through its $10 billion COVID-19 response facility.

President of the AfDB, Dr. Akinwunmi Adesina, who disclosed this yesterday during a digital conference with journalists, said the bank would also consider robust support for small and medium-scale enterprises (SMEs), trade finance guaranties, as well as grants to low-income and fragile countries within the framework of the COVID-19 fund.

At a video conference with 25 journalists representing media organisations in Africa and Europe, Adesina said a little over half ($5.5b) of the response facility would be disbursed in AfDB-member countries as commercial interventions; $3.1b would basically go to low-income African countries/fragile economies as grants; $1.4b will be earmarked for special private sector intervention, just as the remainder would be used to support SMEs. “We are going to be deferring debt repayments for private sector under the facility,” he assured.

“This is a demonstration of the seriousness with which we take the COVID-19,” Adesina said in reference to the $10b intervention. “The most distressing thing I see is the global news about the number (of people) dying as if we are announcing some form of gold medals. Now is the time for serious action.” He described Africa’s 11,400 COVID-19 cases and 572 deaths (at the time of the online conference) as “one death too many, not only in Africa, but also) globally. We must move aggressively.”

African ministers of finance had estimated that the continent would need at least $100 billion to navigate through the economic storm of COVID-19. But Adesina, said the Bank’s projection would be between $110b and $154b.

On fears of sovereign debt default as a result of COVID-19 impact, he said the Bank was doing the simulation of stress level of debts for 2019 and had arrived at $108tr representing 61 per cent of the Gross Domestic Product (GDP), but with the pandemic in 2020, Africa’s debt is projected to be $2.1tr, representing about six per cent of the continent’s GDP.

“Sovereign defaults will depend on how we manage the pandemic,” he said, but the Bank re-iterated that it would re-profile all debt repayments bringing in rating agencies, debt issuers and other stakeholders.

“We will provide liquidity to countries facing problem. We will help Africa to manage and mitigate the impact on economies and get out of the pandemic. No country will be left behind,” Adesina explained.

He added that the pandemic could foreshadow global food crisis, especially in view of the advancing rainy season and to ameliorate this, the Bank would be putting together a platform for African countries to bulk their demand for fertiliser and seeds to guarantee cost efficiency in preparation for the farming season.

Prior to the COVID-19 Response Facility, the bank announced the launch of $3b ‘Fight COVID-19 social bond, which according to him, was negotiated at 1.075 per cent interest rate, adding, “The bond has just been listed on the London Stock Exchange and it’s oversubscribed.”