Debt-distressed African countries again look to International Monetary Fund 

Akani Chauke: Sierra Leone Telegraph: 12 November 2018:

By the International Monetary Fund’s (IMF) own admission, there are circumstances where African governments’ debt levels are so high, they become unsustainable; such that, the scheduled debt service exceeds the capacity of the countries to service it.

This rings true for a number of countries in the Sub-Saharan African region, where the organisation, in its regional economic outlook for the year, warned debt servicing costs were becoming a burden, especially in oil-producing countries.

Among these are Angola, Gabon and Nigeria.

Overall, public debt rose above 50 percent of gross domestic product (GDP) in some 22 countries at the end of 2016, up from ten countries in 2013.

According to the Brookings Institution, Cape Verde, Gambia, Congo, Mozambique, Mauritania, Sao Tome, Togo, Zimbabwe, Ghana and Sudan, respectively, are the countries searing under the heaviest debt.

The rankings are based on public debt as a percentage of GDP. Cape Verde are the heaviest indebted, with its debt 129,7 percent of GDP. Sudan’s debt is 66,5 percent of GDP.

Recent statistics suggest Angola, Africa’s second largest crude oil producer after Nigeria, is not far off. It has a government debt equivalent to over 65 percent of the country’s GDP. Government debt to GDP in Angola averaged 49,75 percent from 2000 until 2017.

Statistics are based on data from the IMF’s World Economic Outlook, the World Bank’s World Development Indicators, and various countries’ national statistics offices and central banks.

IMF economists- Sean Hagan, Maurice Obstfel and Poul Thomsen – jointly blogged that one potent source of uncertainty is the role of a big debt overhang in sapping political support for reforms from the public, which could see its sacrifices as primarily benefiting creditors.

“Pretending that unpayable debts can be repaid will only sap the effectiveness of the debtor’s adjustment efforts, ultimately making all parties lose more than if they had promptly faced the facts,” the trio stated.

On the back of its warnings that servicing debts were becoming burdensome, it is thus ironic that IMF is making a comeback to the African continent.

Countries with an insatiable appetite to borrow, but struggling to repay loans, are sourcing funds from the institution.

Economists pointed out after past few years of inactivity, largely because of increased Chinese funding to Africa, the IMF was back in the fold.

This is largely attributed to falling commodity prices and rising interest rates on loans are pushing several countries into unaffordable debt like that last seen in the 1980s and 1990s.

“Despite – or is it perhaps because of – increasing volumes of Chinese financing to Africa, that oft-reviled old banker, the IMF, is making a comeback to the continent,” stated Peter Fabricius, Consultant of the Institute for Security Studies (ISS).

He noted during the 1980s and 1990s debt crisis many African countries turned to the IMF and its Bretton Woods partner institution, the World Bank, for financial bailouts but the economic formula, including African countries opening their economies to international trade, liberalizing their currencies and drastically cutting costs in exchange for loans, did not address Africa’s economic woes.

“The 21st century, though, introduced a significant new banker – China,” Fabricus stated.

According to the expert, instead of conditionalities, China prided itself on giving or lending money with “no strings attached.”

The IMF stated nonetheless, despite the different approach, the number of sub-Saharan African countries in debt distress or facing high risk of debt distress rose from seven in 2013 to 12 in 2016.

“And so, African countries are returning to the IMF to seek bailouts,” said Fabricus.

The analyst noted China’s unconditional loans for infrastructure had considered the borrowing countries’ abilities to service the loans.

Likewise, this time around, IMF is not quite so demanding about opening economies, but it is still insisting that African countries who want loans, should cut their spending, he added.

South Africa must swiftly slash government borrowing if it is to avoid a debt trap that would force it to seek help from IMF, Finance Minister Tito Mboweni warned.

Recently, IMF downgraded the GDP expansion for Africa’s two biggest economies – Nigeria and South Africa respectively.

IMF cut growth projections for Nigeria to 1.9 percent. South’s economy is projected to grow by 0.8 percent, down from 1.5 percent.

Newly-appointed South African Finance Minister, Tito Mboweni, consequently urged government against borrowing. This, he said would force the country to seek assistance from the IMF.

“When you get into a debt trap that’s where (at IMF) you end up,” he told parliamentarians.

1 Comment

  1. “Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted. There the clever combatant imposes his will on the enemy, but does not allow the enemy’s will to be imposed on him.

    By holding out advantages to him, he can cause the enemy to approach of his own accord; or, by inflicting damage, he can make it impossible for the enemy to draw near. If the enemy is taking his ease, he can harass him; if well supplied with food, he can starve him out; if quietly encamped, he can force him to move.
    By discovering the enemy’s dispositions and remaining invisible ourselves, we can keep our forces concentrated, while the enemy’s must be divided. Hence that general is skillful in attack whose opponent does not know what to defend; and he is skillful in defense whose opponent does not know what to attack” from the Art of War by Sun Tzu.

    I often hear of Africans with innumerable degrees and boy when they speak, you can almost say this guy knows everything. I was once told that “education is the key to success”. But the short term I’ve lived on the earth, I have seen a rise in the so-called education level of Africans but yet we are still stuck in the same place. It’s like the more degrees we pile up the more retrogressive we’ve become. Don’t get me wrong, we see spots of lights far in the tunnel but the closer we get, the farther they disappear into the dark. But this has not stopped the proponents of the so-called education to blame education deficiency as the caused for our deplorable conditions.

    There’s a saying “it is insanity to do the same thing over and over again but expecting different results”. The belief is that once all of Africa is educated, then things will start to get better. This is not only preposterous but it is also a misguided believe. I think we need to take a close look at what we call education and the nature of what we call education today. We need educational reformation, something you barely hear about in our educational discourse.

    You cannot teach young Africans the same way and things as young Europeans. Young Africans should be taught to confront the problems of the African societies, the problems we as a continent and people are facing. And they must be taught based on the value system of Africa. Young Europeans are taught to be conservative, that is, to maintain the control which Europeans already have on the world. To teach young Africans and young Europeans to see the world the same way, is to miseducate young Africans. Young Africans must be taught to dominate the world and therefore they should be taught with a revolutionary mindset.

    No one climbs a ladder starting from the top. But this is the position of African nations, trying to climb the ladder from the top. Despite the atrocities European nations have committed against us as a people, our megalomania leaders will give up their nations and people to sleep in bed with them. And such abominable relationship has spawned the multiplicity of problems we’re confronted with today. We are way too fixated on European nations and want to be just like them. And we often time forget, for Europeans to build their nations, they had to take us as slaves. Use our free labors to lay the foundation upon which they are now building.

    As soon as we laid the foundation, they shipped some of us to various parts of the world to avoid having heavy concentration of us in one place. This in itself was an ingenious move. We must understand the preconception of colonialist, and then we will start to understand why Africa and Africans were compartmentalized and then colonized.

    It was not done by some random sense of misplacement as some may think. It was done so according to design. This way they can program each section to appear different from the other. Hence the saying united they stand, divided we fall. Therefore I say to understand the present, we must closely examine the past. This will bring up the dirty secrets of Europeans which from the look of things many Africans do not want to confront because of their romantic relationships with Europeans. We have sacrificed the greater good of our race and nations for our own personal pleasure and gain.

    While we have been fighting to exorcise ourselves from the evil grip of Europeans, they have being utilizing our manpower and resources to build their nations unto this day. We believe the same Europeans, who once had us as slaves and pleasured from our free labor to build their nations unto this day, suddenly felt bad for us and set us free. And now they want to come help us build our nations so we can be equal to them.

    This is nothing but a whopper and to entertain such belief, means we do deserve to be slaves – accept it and live with it. This Sun Tzu said “Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted. There the clever combatant imposes his will on the enemy, but does not allow the enemy’s will to be imposed on him”

    “Freedom is not given by the oppressor, it must be demanded by the oppressed” said Martin Luther King Jr. But if we were all born as strangers on the earth then you must not demand for your freedom from anyone, you must take your freedom by whatever means necessary from those holding you captives. To demand implies they can reject your request. If someone stole your goods and it is found in their possession, you do not stand there demanding for it, you take it because it belongs to you. This was one of the mistakes we made in the earlier stage of our fight to exorcise ourselves from Europeans control.

    If you go to the world cup, you play by FIFA rules. If you play the game of your enemies, you play by their rules and they control the pace of the game. They can decide at any point to reform the game and you will have to accept the new terms and conditions because you have ignorantly chosen to play their game and on their field. When you need guidance and understanding on how to play the game, you must now go to them since it is their game you are playing. When America did not want to play by the rules of the European soccer (FIFA), they created their own game called American football and set their own rules to govern the game.

    Africa must create her own game and set the rules so she can control the pace of the game and make reformations when she feels like it. But according to the Bible “where there’s no vision the people perish”. And scripture also says “my people are destroyed for lack of knowledge”. The little freedom that was gained by our forefathers, who fought and give up their lives so we can see a brighter day, we have given that freedom back to the oppressor. Instead of us creating our own game, we have decided to join in with them and play their game.

    Why did I refer you to the Art of War by Sun Tzu?
    First to understand what Sun Tzu is talking about and be able to apply it, you must know that you have enemies. This is something African leaders or simply Africans do not think about. We believe everybody loves us and that we do not have enemies. And if we do speak of enemies, it is often about someone from our own country with opposing political views. Such is the short sightedness and narrow mindedness of Africans.

    Young Africans must be thought the art of war to prevent what happened to us in the past from repeating. If you read Chinua Achebe book “things Fall Apart”, you will see how the enemy was able to easily infiltrate our defence because of our misguided belief that nobody is our enemy. I have not looked at the stats yet, but I would not be surprised this generation probably has spent the most on education than any other generation before it simply because Europeans have told us this is the way. And like a drunk in the dark, we are running everywhere at all cost for it.

    Our European lovers advise us on everything but I do not hear about building Africa’s military school so that we can learn the art of war and be able to defend ourselves if we were to be attacked by our enemies. But then why do we need a military since we do not have enemies. Based on our history, we should be the ones building military to prevent what happened to us from happening again. But as the Bible said, now the serpent was more subtle than any beast of the field which the LORD God had made.

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