Little is known about the origin of Covid-19, the where and how are statements that scientists are still grappling with. However, it is becoming even more evident that the socio-economic effects of the world’s second pandemic in the 21 century will be unprecedented. As countries battle to protect their populations from the deadly virus, it will be relevant to create a robust response to the human rights issues that will be presented. As stated in a report by the OHCHR, “generally, the crisis and the global economic slowdown associated with it has the potential to impact on human rights directly and indirectly, including on the ability of individuals to exercise and claim their rights and on the ability of States to fulfill their obligations.”
With most of the world economies shut down, many economists are projecting an economic regression with far more damaging implications that the 2008 economic crisis. African Governments might particularly find themselves in a peculiar position. This is further fuelled by their debt obligations. According to the most recent World Bank debt statistics, in 2018 the region had about $493 billion in long term external debt. To put this into context, in 2018, the region’s total external debt was equal to 36% of its gross national income. Debt service payments that year contributed to the region’s 3.6% of GDP budget deficit. A year later, in 2019, many African countries spent more money servicing their debts than they did on health.
We need to critically think and analyse how the impending debt obligations of African governments, in the face of a pandemic, can better be serviced, lest we find ourselves in a position where the enjoyment of human rights is hampered. Policies that make possible fulfilment of human rights obligations without affecting the long term economic effects of the pandemic are welcome. What further needs to be condemned and avoided is the ‘false dilemma’ that the debt servicing obligations would mean putting the economy first ahead of the people it ought to serve.
The United Nations Basic Principles on Sovereign Debt Restructuring processes will become even more relevant post Covid. It summarily requires human rights to be the centre of debt restructuring. In essence, this means the ‘choice’ between life or debt becomes unequivocal under the international principles of debt sustainability. Juan Pablo Bohoslavsky, an Independent Expert on the effects of foreign debt opines that,
‘The international principle of debt sustainability implies a consideration for the lives of the debtor’s populations. Thus, human rights of the population should guide any decision when it comes to debt. In other words, lenders must be prevented from claiming the full repayment of their credits should this impair the capacity of States to respond to the pandemic and fulfill human rights. Human rights oblige courts to allow debtor States to invoke necessity as a defence in sovereign debt disputes, the case for necessity has never been so strong. This also means that, in turn, States must avoid fully repaying their debts if this entails violating their own human rights obligations towards their populations.’
African Governments should look at the possibility of invoking the considerations of International Monetary Funds Special Drawing rights. In the late 1960s, the IMF was empowered by its shareholders to issue Special Drawing Rights (SDRs) that the central banks of all IMF members hold in their accounts as reserves. If a country is running low on currency to pay its foreign obligations, say dollars or euros, it can exchange its SDRs for the needed currency. The consideration for the issuance of new SDR’s would be based on the world bank Projecting a 20 Percent drop in remittances from low and middle income countries citizens living abroad.
Further according to Mark Plant Chief Operating Officer of CGD Europe, Director of Development Finance, and Senior Policy Fellow, ‘Comparing the IMF’s April 2020 World Economic Outlook to that of October 2019, we estimate that an unexpected drain on low and middle income countries from trade (the current account balance) in 2020 will be in the order of $230 billion, with a median deterioration of about 3 percent of GDP’. What this means is African governments will find themselves in a position of low foreign exchange in their reserves. In turn this could hamper key Human rights obligation of countries such as providing basic services.
The great advantage of SDR is that the are highly liquid assets and if deployed effectively in developing countries can truly support liquidity and ease pressure on central banks and local economies. This in turn can enable the governments to focus their socio economic plans having enough liquidity to finance these projects. SDR’s are of course an unconditional resource and the case for allocation is very strong during an exogenous situation.
A moratorium or total cancellation of sovereign debt may also be one path that African Governments need to consider. Uganda’s President, Yoweri Kaguta, has appealed to the western world to cancel African debt in bid to enable them effectively deal with the economic outcomes of the pandemic. A moratorium potentially alleviates the inevitable default on debt payments by African Governments which could present far reaching implications to the International Economic balance. This would also erode and create fiscal space needed by the governments to provide the adequate and immediate services that their populations need. The G-20’s has called for a moratorium on payments of public and private debt totalling $20 billion, beginning May 1 and lasting at least through the end of the year.
The best response to a potential economic and social catastrophe provoked by the Covid-19 crisis is to put finance at the service of Human rights and to support the less well off through bold financial decisions.
Shane Bemanya Kakare (Pan-African Economic Freedom Fighter)