By LOVEMORE CHAZINGWA, Own Correspondent.
AFRICAN governments should add new revenue resources to finance their development such as remittances and private-public partnerships (PPP), and clamp down on illicit financial flows, a United Nations Conference on Trade and Development (UNCTAD) 2016 report said Thursday, warning that debt looks unsustainable in some countries.
The UNTCAD Economic Development in Africa Report (EDAR) 2016 finds that Africa’s external debt ratios appear manageable, but African governments must take action to prevent rapid debt growth from becoming a crisis as experienced in the late 1980s and 90s.
“Borrowing can be an important part of improving the lives of the citizens of Africa,” UNTCAD Secretary General Dr. Mukhisa Kituyi says:”But we must find a balance between the present and the future, because debt is dangerous when unsustainable.”
At least US$600 billion will be needed each year to achieve the Sustainable Development Goals ( SDGs) in Africa, according to the report which is subtitled ‘Debt Dynamics and Development Finance in Africa’.
This amount equates to one third of countries gross national income. Official development aid and external debt are unlikely to cover those needs, the report finds.
A decade or so of strong growth has provided many countries with the opportunity to access international financial markets. Between 2006 -9, the average African country saw its external debt stock grow 7.8 percent per year, a figure that rose to 10percent per year in 2011-13 reaching US$433 billion or 22 percent of gross national income by 2013.
Several African countries have also borrowed heavily on domestic markets, the report noted.
It provides specific examples and analyses of domestic debt in Ghana, Kenya, Nigeria the United Republic of Tanzania and Zambia.
In some states, domestic debt rose from an average 11 percent of the gross domestic product (GDP) in 1995, to around 19 percent at the end of 2013, almost doubling in two decades.
“Many African countries have begun the move away from a dependence on official development aid, looking to achieve the SDGs with new and innovative sources of finance,” Dr. Kituyi said.
The report argues that African countries should look for complementary sources of revenue,including remittances which have been growing rapidly, reaching US$63.8 billion to Africa in 2014. The report discusses how remittances and Diaspora savings can contribute to the public and development finance.
Together with the global community, Africa must also tackle illicit financial flows, which can be as high as US$50 billion per year. Between 1970 and 2008, Africa lost an estimated $854 billion in
illicit financial flows, roughly the equal to all financial development assistance received by the continent during that time.
While governments should be vigilant of the borrowing risks, PPP have also started to play a more prominent role in financing development. In Africa, PPP are being used especially to finance
infrastructure.
Of the 52 countries considered during the period 1990-20014, Nigeria tops the list with $37.9 billion of investment, followed by Morocco and South Africa.
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