Africa’s ballooning debt is hampering its economies and dimming its prospects of a brighter future. Countries fashioned out strategies to tackle the continent’s poor handling of its debt distress and negotiation in the face of a skewed global financing architecture at the recently launched Debt Management Forum for Africa in Nigeria, writes FELIX OLOYEDE

Many African countries are struggling to cope with their debt burden amid an increasingly volatile, uncertain, complex, ambiguous, and digital global economy. The traditional cliché “Those who go a-borrowing, go a-sorrowing” has become irrelevant as modern economists believe that it is not borrowing that is the problem, but for what purpose and under what sundry terms and conditions. Accumulating debt for recurrent expenditure and non-developmental purposes is where the sorrow lies.

Countries around the world often rely on local and multilateral institutions for various reasons. They seek funding for high-value infrastructure projects that promote economic growth and provide a high return on investment, which helps manage their debt when it matures. These borrowing strategies are typically aimed at long-term investments lasting over 10 to 15 years, with a focus on economic impact. Additionally, they implement active liquidity management plans to ensure timely repayment of the debt. By developing a strong investment grade, countries can attract future loans on competitive and concessional terms while also strengthening their domestic debt markets to enhance the stability of their debt portfolios.

However, several African countries have been contracting loans allegedly channelled to the wrong investments in the mode of vanity projects, consumption purposes, and building roads that lead to nowhere. Besides the faulty strategies, they mainly attract high-interest short-term loans for long-term investments.

Consequently, Africa’s debt burden has surged to 170 per cent in the post-COVID-19 era, compared to 2010 figures, adversely affecting public financing, infrastructure, and the gross domestic product.

African Ministers of Finance recently converged on Abuja for the launch of the Debt Management Forum for Africa and the inaugural policy dialogue titled “Making Debt Work for Africa: Policies, Practices, and Options.”. They acknowledged that many African countries were currently experiencing significant debt distress, more so than in other regions, and that urgent strategic interventions are needed.

The event, organised by the African Development Bank Group, culminated in a consensus that while there is a need to reform the inequitable global financing system, African countries can also take substantial action. This includes addressing financial leakages, leveraging domestic markets, and maximising the use of natural resources to secure essential funding for socioeconomic development.

https://punchng.com/nigeria-others-deepen-strategies-to-tackle-rising-debt-burden/