Ethiopian prime minister Abiy Ahmed has made a bold call for debt cancellation for low-income countries. Abiy is correct, debt cancellation is absolutely necessary to save lives and for developing nations to survive the COVID-19 pandemic. To compel a nation like Ethiopia to spend almost half of its revenue on debt service while its people are suffering from a perfect storm of desert locust swarms, food insufficiency, and a weak healthcare infrastructure is immoral.
Abiy laid out a compelling case for debt relief in a recent opinion piece published in The New York Times, “Why the Global Debt of Poor Nations Must Be Canceled”.
“At the very least,” he writes, “the suspension of debt payments should last not just until the end of 2020 but rather until well after the pandemic is truly over. It should involve not just debt suspension but [also] debt cancellation [...] These steps need to be taken with a sense of urgency. The resources freed up will save lives and livelihoods in the short term, bring back hope and dynamism to low-income economies in the medium term, and enable them to continue as the engines of sustainable global prosperity in the long term.
“In 2019, sixty-four countries, nearly half of them in sub-Saharan Africa, spent more on servicing external debt than on health. Ethiopia spends twice as much on paying off external debt as on health. We spend 47 percent of our merchandise export revenue on debt servicing. [...] The dilemma Ethiopia faces is stark: Do we continue to pay toward debt, or redirect resources to save lives and livelihoods?”
Abiy’s analysis of the urgent need for the cancellation of debt service is relevant to the exacerbating effect of COVID-19 on Africa’s rising food insecurity.
COVID-19 Worsens Food Crisis
From March 30 to April 30, COVID-19 cases in Africa rose from 4,760 to 37,296, an 800 percent increase, and the total number of deaths from 146 to 1,619, a 1,100 percent increase. Experts are legitimately concerned that millions more may die from hunger and poverty as a result of the efforts needed to reduce the spread of COVID-19. Closing borders, stay-at-home orders, loss of income, interruption of supply chains, and disruption of traditional animal migration cycles contribute to food insecurity.
The World Food Programme (WFP) projects that the number of people facing acute food insecurity could rise from 135 million to 265 million in 2020 as a result of COVID-19. According to the WFP, five of the countries that had the worst food crises in 2019 were located in Africa: Nigeria, Ethiopia, Sudan, South Sudan, and the Democratic Republic of the Congo.
A New Financial Architecture Required
While debt cancellation is essential, international and federal mechanisms are required to create new lines of credit to build up countrywide advanced healthcare infrastructure, which all African nations lack. This endeavor should be part of a much larger undertaking to place African nations on a path to become developed industrialized economies. Trillions of dollars of new credit must become accessible for African nations to address the dearth of infrastructure in energy, transport, and healthcare that is killing Africans every day. Successful transformation of African nations requires an urgent focus on nurturing combined manufacturing-agricultural processing industries.
Speaking at a Johns Hopkins webinar on April 22, Gyude Moore, former Liberian minister of public works (2014–2018), emphasized that creating manufacturing jobs is essential to transitioning to a more developed economy.
What has been glaringly brought to the surface by the combined COVID-19 pandemic and the malnourishment of Africa’s population is that the global economic-political system of the past five decades has failed. A new financial architecture is compulsory to save lives and put civilization on the trajectory of progress. This new financial architecture should encompass the following essential missions in Africa:
1- Cancellation of debt
2- New credit generation for physical economic growth
3- Massive investment in hard infrastructure
4- Urgent mobilization to establish modern health infrastructure
5- Significant upgrading of manufacturing and agricultural sectors
There is no equivalency between servicing debt and safeguarding human life. Money really has no intrinsic value.
It is unacceptable in the twenty-first century for every nation not to be equipped with advanced modern health infrastructure. One of the most egregious defects of globalization is that nations have become dependent on imported food because it is somehow construed to be cheaper than producing food at home.
Nations exist to foster the continuation of a human culture moored to the conception that human life is sacred. There is no equivalency between servicing debt and safeguarding human life. Money really has no intrinsic value. Banks are mere servicing bureaus of an economy. Governments legitimately create credit to generate future physical wealth to benefit their citizens. When borrowing or lending arrangements fail to benefit society, then they should be restructured or cancelled. Such financial reorganizations have been achieved many times throughout history.
Prime minister Abiy has brought to the attention of the world a profound underlying principle that should govern all national and international policy: the promotion of human life is supreme; monetary instruments are not.
Lawrence Freeman is a political-economic analyst for Africa who has been involved in economic development policy for thirty years and a former civilian advisor to U.S. Africa Command. He is the creator of the blog lawrencefreemanafricaandtheworld.com.