Kick the credit habit, Africa

Mail & Guardian - - Comment & Analysis -

In 2011, the Zam­bian state owed $2-bil­lion to ex­ter­nal cred­i­tors. By the end of 2017, that fig­ure had more than quadru­pled, to $8.7-bil­lion — and that’s just the of­fi­cial, ac­knowl­edged debt. For­eign in­vestors believe there may be another $8-bil­lion in “hid­den debt” that the gov­ern­ment has failed to ac­count for.

Opaque ac­count­ing prac­tices and un­re­li­able statis­tics mean that we don’t know where all this money went, or how Zam­bia can pos­si­bly pay it back. Cer­tainly, there have been few ob­vi­ous im­prove­ments to in­fras­truc­ture or the av­er­age person’s qual­ity of life that could jus­tify bor­row­ing such enor­mous sums — or even a co­her­ent plan to de­liver these im­prove­ments.

We do know, how­ever, that hun­dreds of mil­lions of dol­lars are be­ing spent ev­ery year to ser­vice this debt, money that would be much bet­ter spent on health, ed­u­ca­tion or hous­ing. Zam­bia’s gov­ern­ment has mort­gaged the coun­try’s fu­ture, with lit­tle to show for it.

Zam­bia is not alone. Ac­cord­ing to fright­en­ing new statis­tics from the International Mone­tary Fund, Zam­bia is among nine African countries that are at high risk of debt dis­tress. Another six are even worse off, and are al­ready in debt dis­tress. This raises the very real prospect of wide­spread de­faults, and an eco­nomic cri­sis that could de­rail the very mod­er­ate im­prove­ment in eco­nomic growth reg­is­tered in sub-Sa­ha­ran Africa last year.

Like a com­pul­sive shop­per us­ing one credit card to pay off another, too many African gov­ern­ments are tak­ing on too much debt far too ca­su­ally. But ques­tions must also be raised about the pri­vate lenders ex­tend­ing this credit. Not enough due dili­gence is go­ing into ensuring that vul­ner­a­ble countries can af­ford the loans, or whether the money is be­ing used for its in­tended pur­poses.

As al­ways, it will be or­di­nary peo­ple who will foot the bill — fu­ture gen­er­a­tions in hock for loans that de­liv­ered lit­tle to no gen­uine de­vel­op­ment — loans that, in some cases, their gov­ern­ments haven’t even de­clared.

Maybe it’s time to put away the credit cards.

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