A research study by the Jubilee Debt Campaign (JDC) states that many poor African countries are already suffering from a debt crisis as a result of Covid-19.

Port of Beira, Mozambique.

Angola, Mozambique and Cape Verde are all among the most highly indebted African countries. Since late-February, interest rates on new government borrowing have increased by an average of 3.5 percent for low and lower-middle-income countries. The average yield for these governments, which is an indication of the cost of new borrowing, is now 10 percent.

Compounding this, commodity prices have plunged. The Bloomberg commodity price index has fallen 27 percent since the start of 2020 and is now at its lowest level since 1986. Since the start of 2020 the price of copper has fallen 21 percent, oil 61 percent, and coffee 15 percent.

Urgent action is needed to support poor countries being hit by the economic impacts of coronavirus. The International Monetary Fund (IMF) and World Bank have called for an immediate suspension of all debt payments to other governments by a group of the poorest countries, also known as a debt moratorium.

Reacting to the news, Tim Jones, head of policy at JDC, said: “The IMF and World Bank are right to call for a suspension of debt payments to other governments, but they also need to waive debt payments to themselves as well. Furthermore, the Fund and Bank need to call for and support a suspension of payments to private creditors. It would be outrageous to allow private speculators to keep taking high interest payments from poor countries at this time of crisis.”

Zambia is already in a debt crisis, with debt payments taking up more than 30 percent of the government’s revenue, and public spending has fallen by 18 percent since 2015. The price of copper, Zambia’s main export, has fallen by 21 percent since the start of the year. Speculators have been selling the government’s debt, expecting a default soon, said JDC.

Chad already has a debt crisis caused by loans from oil traders. This debt was restructured as part of an IMF programme in 2018. JDC said that it criticised this at the time because it did not reduce the debt enough to protect the country from further economic shocks. Such a shock has now arrived, with the oil price falling by 61 percent since January.