…As continent’s debt climb 70% of GDP
…We want comprehensive, quick restructuring; debt standstill not enough” – Stiglitz
…Proposes international debt framework that includes private sector
…G20 gives out $500bn SDRs
Ben Eguzozie, in Port Harcourt
Nobel laureate in Economics, and globally acclaimed development economist, Joseph E. Stiglitz has called for a comprehensive global plan to help countries (especially African) cope with mounting debt that has been compounded by the Covid-19 pandemic.
Stiglitz, a recipient of the Nobel memorial prize in Economic Sciences in 2001, spoke at the virtual launch of the African Development Bank’s (AfDB) 2021 African Economic Outlook report during a conversation with Bank president, Akinwumi Adesina.
“That’s a question I’ve been very concerned with for a long time… You need debt restructuring, and that needs to be really high on the international agenda,” said Stiglitz, American economist and a professor at Columbia University, USA.
Stiglitz added: “Every country has bankruptcy laws but there’s no bankruptcy law for international debt.”
He said: “Remember when there’s too much debt, it’s as much the creditor’s problem as the debtor’s problem.”
Meanwhile, Adesina, the AfDB president, informed that Africa’s debt stock had climbed to 70 per cent of the continent’s gross domestic product (GDP). He then sought Stiglitz’s views on the prevailing global debt architecture.
Adesina and Stiglitz went on to discuss recent debt relief efforts, including a debt standstill that the G20 group of wealthy nations presented to the world’s poorest countries in April 2020.
Stiglitz said the standstill took place when it seemed the pandemic might only last a few months. “Now that it’s lasted a year, a standstill is not enough,” the Economic Sciences laureate said.
“What needs to be done with debt is comprehensive and quick restructuring. We don’t want to fall into the trap of doing too little, too late,” Stiglitz said.
This year’s African Economic Outlook highlights how the economic fallout of the Covid-19 pandemic has contributed to rising debt levels among African countries, and proposes remedies.
Stiglitz has therefore, proposed an ‘international debt framework,’ which had to include the private sector, given its growing role as a source of government debt.
According to the African Economic Outlook, the share of commercial creditors in Africa’s external debt stock has more than doubled in the last two decades, from 17 per cent in 2000 to 40 per cent by the end of 2019.
Some hope has come in the form of new special drawing rights, potentially $500 billion, which the G20 pledged earlier in March to the International Monetary Fund (IMF) to support poor countries.
Adesina said the funds would “go a long way” to stabilizing foreign reserves and the exchange rate, allowing countries to go back to the market.
He said another solution could be to establish an African financial stabilization mechanism where African countries can pool their funds, which would allow countries to have “endogenous” fiscal and monetary policies to ensure that you deal with “the cause of the illness…and not always the symptoms.”
Both Stiglitz and Adesina strongly favoured beefing up Africa’s healthcare defence, investing in quality healthcare infrastructure which is so important. “We are going to be investing in this… and the private sector has to play a big role,” Adesina said.
He called for vaccine justice, as so far, only one per cent of the continent’s population had received delivery of vaccines – a key part of the continent’s health and economic response, as the African Economic Outlook report also points out.