COVID-19 Africa Watch talks to Danny Leipziger, Professor of International Business at the George Washington University about debt and debt relief amid the ongoing coronavirus pandemic.

Key Takeaways

Below are a few of the main takeaways from COVID-19 Africa Watch’s conversation with Danny Leipziger, Professor of International Business at The George Washington University and Managing Director ofThe Growth Dialogue.

• African countries have limited options to handle the economic impact of the pandemic. In theory, governments should prepare fiscally in good times so as to have wider fiscal space during crises, but in practice it is very difficult for politicians to do so.
• A doubling or tripling of fiscal deficits in Sub-Saharan African countries is likely coming.
• Most emerging market debt was issued by middle- and lower-middle income countries, and these countries do not benefit from the G20 Debt Service Suspension Initiative.
• As happened with the Brady Plan, debt re-profiling should be designed in such a way that encourages more responsible debt management. Likely, the World Bank and the IMF will need to be involved to ensure that the new debt re-profiling is consistent with a development and financing plan that has some merit and success possibilities.
• Political leadership and getting China involved more multilaterally will be essential, but governments and their partners will also need to convince the private sector that this newly re-profiled debt will have a higher probability of being repaid.

The interview was conducted by Walter Pacheco, the Head of the Debt Management Office at the Ministry of Finance of Angola and an IFC-Milken Institute Capital Market Scholar.