In spite of recent experience of relatively better economic performance Sub-Sahara African countries have been experiencing the International Monetary Fund (IMF) stated here on Tuesday there was a danger that high borrowing and indebtedness could erode the gains made so far.
Although the fund listed easier access to the international capital market as one of the factors supporting the positive outlooks, the fund expressed worry in the April 2018 Africa Regional Economic Outlook report that this could create a debt refinancing trap for the region in future if growth in advanced economies suffered a jolt.
The report expressed worry that if current growth in advanced economies slows down “the borrowing terms for the region’s frontier markets will likely become less favorable and can coincide with higher refinancing needs for many countries across the region.”
The economic outlook report projected the region to record about 3.4 percent average economic growth in 2018 and 3.7 percent a year later, compared with the 2.8 percent growth experienced last year.
Performing the Continent-wide launching of the report here at Abebe Selassie, Director of the African Department of the IMF expressed worry that the debt levels could jeopardize these modest recoveries being experienced..
According to him weaknesses were appearing in many of the economies in the region due to these high debt levels in these countries with about 40 percent of low income countries in the region, having debt levels described as “either debt distress or high risk of debt distress.”
Turning the current recovery into a sustained strong growth calls for steps to reduce macro-economic weaknesses including implementing planned controlled spending and revenue mobilization while boosting growth in the countries said Selassie.
Raising growth potentials, Selassie said will require reducing market distortion, fostering private investment and strengthening revenue mobilization.
“The Ghana Beyond Aid agenda that President Nana Akufo-Addo highlighted to me, as an African sounds like a rallying call to what the region needs to address at this moment and the key part of moving Ghana beyond aid; and indeed other countries beyond aid in the region is going to be significant revenue mobilization,” he stressed.
The report under the theme: “Domestic Resource Mobilization and Private Investment” stated that about 60 percent of the region’s total public debt on average was borrowings from outside the region with average interest rates rising to 12 percent last year compared with four percent in 2013.
For the first half of 2018 alone the region plans to borrow a total of 11 billion US Dollars in addition to the 7.5 billion dollars borrowed last year.
In his keynote address, Ghana’s Vice President, Mahamudu Bawumia pointed at the need to make economic growth more inclusive in the region.
“Overall, across the sub-region growth has not been inclusive to expand job creation opportunities. Unemployment among the youth is rising with increasing concern. Growth has also been insufficient to make significant reduction s in poverty,” he observed.
To deal with this situation Bawumia emphasized the need to shift from the old paradigm of natural resource exploitation and export of unprocessed agricultural products and minerals since that was no longer sufficient to grow the economies that gives jobs and meets social expenditure expectations. Enditem