Be careful with external borrowing, urge an economist to African states

Company News of Monday, July 8, 2019

Source: Ghananewsagency.org

2019-07-08

Economists have urged African states to be cautious about excessive borrowing from outside investors as this could pose a serious threat to their economies.

Tirivangani Mutazu, Debt Management Policy Analyst at the African Forum and Network on Debt and Development (AFRODAD), said that a number of African countries were having difficulties servicing their debt. debts.

He added that some were in arrears, that others had an impending debt restructuring and that many others had indications of a high probability of over-indebtedness.

He said this at a "Debt Advocacy Forum" held in Accra.

The event, organized by Grbadroots Africa and AFRODAD to discuss debt management and borrowing by African states, focused on: "Questioning Ghana's Debt Management Strategy: Lessons for African States" 'West Africa".

The forum also highlighted the need to reduce borrowing from external sources and to ensure that debt management processes are transparent and accountable.

Mutazu said about 15 percent of African countries were over-indebted and the same fate was expected for about 28 percent of countries at higher risk of debt distress.

He said that only seven percent more than 53 countries; Uganda, Morocco, Libya, Botswana, Lesotho, Rwanda, Senegal and Tanzania faced a low risk of debt crisis.

Mutazu said the current debt service, which consisted of interest and principal repayments, absorbed 20 percent of governments' annual budgets, leaving some countries with limited fiscal space to focus on governments such as poverty reduction and the achievement of national development. plans and objectives for sustainable development.

To the extent that borrowings could promote growth and be a useful development tool, unsustainable borrowing could be a problem, especially for countries with poor investment choices and debt servicing potential below expectations. he declared.

This, he said, was a major impediment to development that has led countries to lag behind in their commitments to national and global development plans.

Mutazu urged Ghana to continue to improve the management of its sustainable debt strategies, address the weaknesses in its financial sector and implement the recently pbaded law of fiscal responsibility by Parliament to keep the public debt below the threshold. 65% of gross domestic product.

Mr. Johnson Wilson Appiah Kubi, Economist, presented a report from AFRODAD on the theme "Controlling Loans and Loan Management", explaining that public borrowing has advantages as it is a Near zero risk investment option for investors and fund managers their investment.

He added that it has also helped develop market infrastructures such as the legal framework, improve the efficiency of the payment system and also serve as a liquidity management tool for the central bank of a country. .

Mr Kubi said it was unfortunate that the meager revenues collected in Ghana were used for debt service rather than for spending in vital sectors such as education, health and infrastructure criticism.

He said Chad and Mozambique were over-indebted; and Ghana, the Central African Republic, Senegal and Zambia were highly exposed to the risk of debt distress.