The current situation calls for extremely difficult choices by every nation across the world. The rapid spread of COVID-19 has unwrapped the fragility of our globalised system. Under such circumstances, the pressure on the debt-laden poor countries is all the way soaring. How will the sub-Saharan countries fight this catastrophe?

The Existing Debt Crisis of Africa

Coronavirus has added to the agony of Africa which was already trapped under a huge debt crisis. The sub-Saharan Africa is moving into a new debt crisis with more than 40% of the countries under a high risk of debt distress, double of what it was 5 years ago. Public debt has now climbed above 50% of Gross Domestic Product (GDP) in nearly all of these countries. And the worst part is that China is the biggest bilateral creditor of Africa. Earlier, in 2012, a round of debt relief came from the Heavily Indebted Poor Countries Initiative which reduced its foreign public debt to a large extent. But at that time, the continent’s biggest lenders were IMF and the World Bank. China has granted loans of more than $146bn to Africa since 2000 so it might not be that lenient.

The other countries are of the view that if they help Africa, they would ultimately be sending money to the Chinese lenders. Each and every country at the current moment is pissed off at China because of the “Chinese virus” and in my opinion they won’t be doing anything that will be beneficial for China.

chinese loans to african government and coronavirus

Healthcare in Africa

Lack of adequate funds and improper infrastructure has always been a challenge for the governments of the sub-Saharan countries. Africa accounts for less than 1 percent of global health expenditure and only 3 percent of the world’s health workers. It also accounts for almost 50% of the world’s deaths of children under age 5 years, has the highest maternal mortality rate, and bears a heavy toll from HIV/AIDS, tuberculosis, and malaria. The large, densely populated settlements, poor access to safe water and sanitation facilities pose a threat to the containment of any disease.

Impact of coronavirus on Africa

According to the World Bank, “Growth in Sub-Saharan Africa has been significantly impacted by the ongoing coronavirus outbreak and is forecast to fall sharply from 2.4% in 2019 to -2.1 to -5.1% in 2020.” A negative growth rate, as predicted, is definitely a sign of impending recession that means falling money supply and a decline in wage growth.

A report from World Bank said – “While most countries in the region have been affected to different degrees by the pandemic, real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies – Nigeria, Angola, and South Africa— as a result of persistently weak growth and investment.”

Fighting coronavirus in African countries is a bit different from the rest of the world. Social distancing cannot be easily practiced here as the poor population here is highly dependent on their daily income for survival. Given the underdeveloped healthcare infrastructure in these countries, an uncontrolled outbreak of coronavirus can cause innumerous deaths and a situation of utter pandemonium. A total of 14,057 cases have already been recorded for the countries in Africa with 740 deaths. The biggest threat could be the disruption of the food supply system. If that happens, the production in the agricultural sector would definitely turn down. Higher transaction costs and reduced domestic demand will result in a decline in food imports.

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The debt distress is not a new situation for Africa, it has seen worse than this in the 1980s. But the problem lies in the fact that even then it was unable to clear its dues and the HIPC initiative had curbed its trouble to some extent.

But now, the scenario is different. The healthcare sector, as underdeveloped as it is, has to find a way to fight this pandemic. The governments are not in a state to borrow from other countries because of their looming debt crisis. Also, most of the countries are facing this disaster and are desperately in need of funds, so instead of lending it out, they will rather use funds for their own countries.

For sub-Saharan countries, the governments and companies will soon be facing cash and working capital shortages. Due to the slowdown in the economy, tax receipts will drop creating liquidity issues for the government. Because of this the governments’ ability to pay for emergency requirements, healthcare and infrastructure will be cramped.

The World Bank expects COVID-19 to cost Sub-Saharan Africa up to $79 billion in lost output in 2020, plunging the region into a recession. World Bank’s Chief Economist for Africa, Albert Zeufack in an interview said that the approximate amount of debt service for 2020 is around $44bn for the sub-Saharan countries. They need a debt relief or debt standstill for being able to put up a strong fight against this pandemic.