Rumbidzai M. Masango
JOHANNESBURG - Africa’s rising debt levels pose a significant threat to development. Statistics show that what was foreign debt of approximately US$170–210 billion for sub-Saharan Africa between 1995-2005 (when the G7 debt relief lowered it by 10 per-cent) has risen to nearly to $407 billion by 2018 (Jubilee Debt Campaign, 2018).
According to The Economist, public debt has climbed above 50% of the Gross Domestic Product (GDP) in at least half of sub-Saharan Africa. The risk of a massive economic crash is growing.
This scenario is exacerbated by sluggish economic growth and the increase of debt as a share of GDP. For policymakers and development practitioners, such a combination presents significant challenges, especially when considering the role and impact of debt. To be fair, debt can – and should – foster economic growth and development. However, where such debt is acquired recklessly, and without due consideration to terms and conditions for repayment, consequences can be dire. Therefore, much emphasis should be placed on how debt is acquired, managed and deployed as a tool for sustainable development.
Since 2013, the International Monetary Fund (IMF) has expressed concern regarding rising debt levels in low-income countries. In the aftermath of the debt write-off for Heavily Indebted Poor Countries (HIPCs), multilateral institutions such as the IMF had hoped debt levels for low-income countries would become more manageable, creating a conducive environment for sustainable debt and development. However, statistics show that at least 70 per-cent of low-income countries recorded even higher deficits in 2017 than during the period 2010-2014.
For example Zambia, a beneficiary of the IMF’s 2005 HIPC scheme, now has public debt of approximately 59% debt-to-GDP ratio. South of the Zambezi, Zimbabwe’s debt accounts for 75% of its GDP, with domestic debt having increased from $US4 billion to US$7.7 billion between November 2017 and August 2018. Mozambique and Mauritania have debt-to-GDP ratios near or above 100 percent. For Madagascar and Namibia, public debt is approximately 41% (2017), a stark increase for Namibia which had a debt-to-GDP ratio of 23.2% in 2014. Recent debt figures for Angola are not known as the government is yet to undertake a public debt audit. However, in 2016, the debt-to-GDP ratio in Angola was estimated at 79.8%.
These statistics are largely reflective of the prevailing picture across the rest of the continent. For example, countries such as Burundi, Cameroon, Central African Republic, Ethiopia, The Gambia and Ghana currently exhibit similar trends and high risk of debt distress. In an attempt to restore macroeconomic stability, debt sustainability and steer their countries towards economic growth, most governments have made a case for austerity measures. Thus, over the last two years, governments such as Angola (January 2018), Mozambique (December 2017), Swaziland (November 2018), Zambia (May 2019) and Zimbabwe (November 2018), have introduced austerity measures. The rationale is that by spending less, government is able to repay its external debts and improve their ratings with credit agencies. Because of their nature, however, austerity measures are harsh and often result in undesirable economic consequences, which include lack of – or reduced – access to social services, increased taxes, unemployment and decreases in household consumption and spending.
Furthermore, most austerity measures, once introduced, have wide-ranging implications on the extent to which political, social, economic and cultural rights are both enjoyed and protected. For example, decreases in government spending have an adverse effect on marginalised groups, especially those further impacted by economic disenfranchisement. Women, in particular, are the most impacted by rising debt levels across Africa. In addition, the unresolved debt question has also resulted in high youth unemployment and poverty levels in the region. And, in most cases austerity measures are targeted at poor citizens while government, bureaucratic and political elites continue to live and spend lavishly using State resources.
So, what is to be done? In short, nothing less than a holistic approach can arrest rising debt levels and redirect southern African countries towards a path of sustainable debt and development. As such, civil society activists, policymakers, development practitioners, journalists and the wider public need to consider various ways of bringing discussions on southern Africa’s debt conundrum into the mainstream. Evidently, there is need to interrogate current debt narratives within Africa in relation to external actors, some of which wield significant power over African countries because of the former’s indebtedness. More importantly, interrogating existing narratives creates the opportunity to develop alternative pan-African narratives, strategies and solutions that promote transparent, accountable borrowing and lending as well as efficient public spending that is premised on sustainable development, of which a key feature is the advancement and protection of human rights, not least among these, social and economic rights.
It is precisely for this reason that the Open Society Initiative for Southern Africa (OSISA), is hosting a two-day conference on southern Africa’s debt conundrum. We strongly believe that by going back to basics, and by pursuing models of democratic developmental States, we can collectively create opportunities that can resolve our regional debt crisis and set southern Africa and the rest of the continent on path towards sustainable debt and development.
* Rumbidzai M. Masango is the Programme Manager: Economic Justice at the Open Society Initiative for Southern Africa (OSISA).
2019-07-04 10:14:04 | 1 years ago