IMF to Africa: Put away the credit cards

Bal­loon­ing na­tional debt threat­ens to pre­cip­i­tate another sub-Sa­ha­ran debt cri­sis

Mail & Guardian - - Africa - Si­mon Al­li­son

First, the good news: there has been a mod­est in­crease in eco­nomic growth in sub-Sa­ha­ran Africa, ac­cord­ing to the International Mone­tary Fund’s (IMF) lat­est re­gional eco­nomic out­look. This growth, pro­jected at about 3.5% in 2018, is nearly a per­cent­age point higher than last year, mostly thanks to stronger global growth and im­proved prices for com­modi­ties such as oil, alu­minium, iron ore, cop­per, cot­ton, tea and vanilla.

But “these con­di­tions are not ex­pected to last very long”, warns Papa N’Di­aye, a se­nior IMF of­fi­cial.

That’s not the bad news. The real worry is the number of countries strug­gling with bal­loon­ing debt. The IMF says that six African countries are in debt dis­tress — Chad, Eritrea, Mozam­bique, the Repub­lic of Congo, South Su­dan and Zim­babwe. Another nine countries are at high risk of debt dis­tress.

One statis­tic il­lus­trates the scale of the prob­lem: over the past four years, re­pay­ing na­tional debt has, on av­er­age, tripled as a per­cent­age of na­tional ex­pen­di­ture — from 4% in 2013 to a whop­ping 12% in 2017.

A ma­jor rea­son for this debt was the sharp de­cline in oil prices in 2014, which forced oil ex­porters such as An­gola, Chad and Gabon to bor­row heav­ily to cover the short­fall. Elsewhere, countries bor­rowed to fund ma­jor in­vest­ments in pub­lic in­fras­truc­ture, although these in­vest­ments were not al­ways wise — just ask Mozam­bique, which now has an ex­pen­sive fleet of tuna fish­ing boats that are rust­ing in the har­bour.

N’Di­aye says it’s not too late for heav­ily in­debted countries to es­cape the debt trap but it re­quires the im­me­di­ate im­ple­men­ta­tion of con­sol­i­da­tion plans.

The IMF did not com­ment on the irony of it sound­ing the alarm on debt, when its in­fa­mously ex­pen­sive struc­tural ad­just­ment pro­grammes pre­cip­i­tated Africa’s last ma­jor debt cri­sis, which be­gan in the 1980s.

Another irony: it may have been African countries’ suc­cess in emerg­ing from that last debt cri­sis that leaves it on the brink of a new one.

Justin San­de­fur and Divyan­shi Wad­hwa of the Cen­tre for Global De­vel­op­ment said: “Eco­nomic growth con­verted a number of ma­jor African economies from low- into lower-mid­dle-in­come countries ... in the process they seem to have fallen into an awk­ward mid­dle ground: not fac­ing any im­mi­nent cri­sis, they were too suc­cess­ful for most kinds of con­ces­sional fi­nance from the mul­ti­lat­eral fi­nan­cial in­sti­tu­tions, but still frag­ile enough that the cost of fi­nance from com­mer­cial cred­i­tors was high.”

This time around, it is pri­vate cred­i­tors rather than other countries or international in­sti­tu­tions that hold much of Africa’s debt.

One way to ad­dress the loom­ing debt cri­sis is for African countries to start rais­ing more taxes. As The Econ­o­mist ex­plains: “Dis­as­ter can still be averted. Sud­den spend­ing cuts would leave half-finished in­fras­truc­ture projects to rust, and could po­ten­tially ex­ac­er­bate the debt crunch by tip­ping economies into re­ces­sion. In­stead, re­search from the IMF sug­gests that the least costly way to deal with fis­cal im­bal­ances in Africa is to raise the re­gion’s mea­gre tax-to-GDP [gross do­mes­tic prod­uct] ra­tio, which has crept up by just a cou­ple of per­cent­age points this cen­tury.”

Abebe Aemro Se­lassie, di­rec­tor of the IMF’s African de­part­ment, said: “Pol­i­cy­mak­ers need to seize the op­por­tu­nity pro­vided by favourable ex­ter­nal con­di­tions to turn the cur­rent re­cov­ery into durable strong growth by tak­ing do­mes­tic pol­icy steps to re­duce fis­cal im­bal­ances and raise medium-term growth po­ten­tial.

“Pru­dent fis­cal pol­icy, es­pe­cially do­mes­tic rev­enue mo­bil­i­sa­tion, is crit­i­cal to make room for key in­fras­truc­ture and so­cial spend­ing. On av­er­age, there is scope to raise tax rev­enues by three to five per­cent­age points of GDP over the next few years. Re­forms to nur­ture a dy­namic pri­vate sec­tor are needed to pro­vide the foun­da­tions to raise the low level of pri­vate in­vest­ment, for ex­am­ple by boost­ing in­tra-Africa trade and deep­en­ing ac­cess to credit.” The Univer­sity of Zam­bia, the coun­try’s lead­ing univer­sity with a stu­dent body in ex­cess of 35 000, has apol­o­gised to women stu­dents af­ter it is­sued a new dress code urg­ing them to stop visit­ing the li­brary “half naked”. A poster sug­gested that cer­tain women were dis­tract­ing their male coun­ter­parts. The dress code di­rec­tive caused divisions on cam­pus, with some stu­dents sup­port­ing it and oth­ers call­ing it “dic­ta­to­rial”. An um­brella body of Zam­bia’s civil so­ci­ety or­gan­i­sa­tions con­demned the no­tice and the of­fend­ing poster has since been re­moved. Chris­tine Kanyengo, the univer­sity’s li­brar­ian, said: “We would like to un­re­servedly apol­o­gise to our fe­male li­brary users for any of­fence caused.”

Love con­quers crocodile

Just days be­fore her wed­ding was sched­uled, Zanele Ndlovu lost her arm in a crocodile at­tack. She and her fi­ancé Jamie Fox had been ca­noe­ing down the Zam­bezi River when a crocodile “jumped out of the wa­ter” and sunk its teeth into her arm. But the Zim­bab­wean cou­ple re­fused to put off their spe­cial day: Ndlovu donned her wed­ding gown, hav­ing ad­justed the right sleeve, and mar­ried Fox in front of 60 peo­ple at a hos­pi­tal chapel in Bu­l­awayo.

Another Nige­rian sick note

Nige­rian Pres­i­dent Muham­madu Buhari has an­nounced that he will be trav­el­ling from Abuja to the United King­dom for four days this week, to see his doc­tor. Last year, Buhari spent more than 100 days in Lon­don for the treat­ment of an undis­closed ill­ness, rais­ing con­cerns about his fit­ness for of­fice. De­spite his peren­nial ill health, Buhari has de­clared his in­ten­tion to run for a sec­ond term dur­ing the 2019 elec­tions.

Graphic: JOHN McCANN Data source: IMF RE­PORT (2018)

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