African governments should devise means of promoting sustainable debt management strategies that are transparent and take full advantage of debt relief opportunities. This can be done through prudent management of resources according to Mr. Tirivangani Mutazu, AFRODAD’s senior policy analyst during a recent televised broadcast. He warned that debt might remain unsustainable in some countries in Africa amid shocks from the global COVID 19 pandemic.
Mr. Mutazu was speaking at a ZIMCODD’s televised dialogue episode hosted by the Zimpapers TV Network on the 13th May 2020 in Harare, Zimbabwe. The dialogue ran under the topic “Emergency support from Abroad: How is Government managing debt and foreign aid”. The discussion was a part of the ZIMCODD’s National Purse Dialogue Series being co-produced with the media house in order to provoke critical debate on the debt question and development challenges in Zimbabwe and Africa as whole. “Borrowing can be an important part of improving the lives of African citizens but Countries themselves through their leaders, policymakers and citizens, must find the necessary political will to urge for prudence in debt management and transparency in borrowing thus curbing pitfalls of excessive debt that is dangerous for recipients” Mr. Mutazu says.
The need for greater transparency comes as Sub Saharan Africa (SSA) faces unprecedented dual shocks from the COVID-19 pandemic. According to the World Bank (2020), the SSA region is going to fall into an economic recession for the first time in 25 years. Economic growth is projected to fall from 2.4% in 2019 to between -2.1% and -5.1% in 2020. Economic output losses are fore-casted to be between US$37 – US$79 billion. The reduction in production will be mainly due to country lockdown, reduced Foreign Direct Investment (FDI), slump in tourism, reduced remittances, capital flight and reduced foreign aid.
Zimbabwe as a case study is about $2bn behind on payments to official lenders including the World Bank and African Development Bank (AfDB), though it has paid off the IMF loan. According to the World Bank, Zimbabwe's public debt had accumulated to US$16.81 billion as at the end of June 2019; 72.8% being external debt arrears whilst domestic debt stood at 37% of GDP which is way above the regional average of 20%. These debts have largely been attributed to high budget deficit, central bank overdraft facility, costly infrastructure projects and depreciation of local currency. Country creditworthiness has been in jeopardy and this has negative implications on credit lines.
In Africa many governments who have found themselves in some form of debt distress have been struggling to abide by their set debt management legal frameworks. “Current challenges in Zimbabwe’s debt position revolve around Government’s continued struggle to abide to borrowing limits set by the National Assembly resolution. The Ministry of Finance is not willing to present to Parliament a comprehensive report on loans and guarantees issued by the State; forgetting that debt transparency is very important. Policymakers in borrowing countries need reliable debt information to make informed borrowing decisions. Creditors, donors, analysts, and rating agencies need such information to assess sovereign creditworthiness and to appropriately price debt instruments. Citizens cannot hold their governments accountable if they are inadequately informed on sovereign debt.
AFRODAD urges African governments to advance systems of governance that are democratic, transparent, efficient and development-oriented. It is on the ground of such internal cohesion, discipline and progressive commitment that debt relief can truly become meaningful in Africa.