MEFMI hosts a Webinar on the Impact of COVID-19 on Public Debt

The COVID-19 pandemic represents a typical case of the materialisation of contingent liabilities, i.e. obligations whose timing and magnitude depend on the occurrence of some uncertain future event outside the control of the government. The pandemic has created significant fiscal costs to governments which have been required to adjust their spending plans to cover the costs arising from COVID-19.  Specifically, the pandemic has led to increased public expenditure, arising from the containment measures and efforts to address the health and socio-economic impacts of the disease. At the same time, economic activity remains subdued due to the lock-down measures implemented in many countries across the world. The IMF’s World Economic Outlook (WEO) of April 2020 projects global growth to contract by 3 percent in 2020 while growth in Sub-Saharan Africa is projected to shrink by 1.6 percent. Furthermore, commodity prices have fallen sharply in recent months while currency depreciation has been recorded in most countries. Consequently, government revenues and foreign exchange receipts are projected to decline sharply, thereby aggravating the macroeconomic imbalances. These developments have or are expected to elevate the debt vulnerabilities of most developing economies because the matrices used to measure debt repayment capacity have worsened.

As part of MEFMI’s efforts and responsiveness to assist MEFMI countries address the economic challenges caused by the pandemic, the Institute conducted a Webinar on the Implications of COVID-19 on Public Debt and the Proposed Responses on 5 June 2020. The main objectives of the Webinar were to: create awareness on the implications of the COVID-19 pandemic on public debt; highlight the alternative financing options and how best governments can explore these opportunities while minimising the associated risks; and create awareness on the debt rescheduling options available. This was the first webinar organised by MEFMI, reflecting the Institute’s dynamism to adopt new modes of delivering services to member countries.

A total of 60 participants participated in the webinar and these were drawn from 11 of the 14 MEFMI member countries, (Angola, Botswana, Eswatini, Lesotho, Kenya, Malawi, Mozambique, Namibia, Tanzania, Zambia and Zimbabwe). In addition, staff from the MEFMI Secretariat, UNCTAD, International Consultants and Civil Society Organisation (CSO) attended the Webinar. The Director of Development Finance International, Dr. Matthew Martin, was a resource person in the activity while Mr. Stanislas Nkhata of the MEFMI Secretariat, moderated the event.

The main output of the Webinar was that it enhanced the knowledge of MEFMI member country officials and other stakeholders on the impact of COVID-19 on public debt, debt relief initiatives by the international community and the available financing options. MEFMI expects the public sector officials to use this knowledge to develop and implement strategies that minimise the debt related costs of the pandemic.

Going forward, the Institute plans to support countries in priority areas that participants highlighted in a survey that was administered at the end of the Webinar. These areas include conducting debt sustainability analyses, debt restructuring, and domestic and external borrowing among others.

Prepared by Josephine Tito