Survey of impact of COVID-19 on African Trade Finance

Abstract

The unprecedented impact of the COVID-19 pandemic on health, economic, and financial systems around the world, combined with containment measures (social distancing, lockdowns, and border closures) to reduce the spread of the virus and mitigate its impact, plunged the world into a major synchronized global downturn. Global output, which was pre-pandemic forecast to expand by 3.3 percent in 2020 contracted by about 3.5 percent, and Africa suffered its first economic recession in 25 years. Similarly, global trade, which was forecast to expand by 2.7 percent in 2020, contracted by 9.2 percent. The main objective of the study was to understand how the global health crisis affected the dynamics of trade finance. The survey also sought to make recommendations and outline policy actions that could ensure banks have adequate access to trade finance, to sustain trade flows and accelerate the process of economic recovery post-COVID-19. The study findings broadly support the narrative that COVID-19 affected the trade finance activities of banks across the continent and led to material disruptions to trade. Specifically, L/C business and correspondent banking operations witnessed a significant slump and could exacerbate the continent’s trade financing gap, while reversing gains in the expansion of African trade during the preceding few years.