From Uche Usim, Washington DC
With many African nations currently neck deep in debts from multilateral lenders, the Managing Director of the International Monetary Fund, Ms. Kristalina Georgieva, has called for pragmatic strategies to tow them out of the mess as the situation was completely heartbreaking.
She underpinned her inference on the fact that a great portion of the debtor countries’ revenues are gulped by debt servicing.
Georgieva, who spoke yesterday at the ongoing Spring Meetings of the IMF and World Bank in Washington DC said: “African countries spend, on average, 12 percent of their revenue on debt servicing. This is more than double from the last decade. They were at 5 percent a decade ago.
“What is heartbreaking is that in some countries, the debt payments are up to 20 percent of revenues.
“What does that mean? It means that what could have gone to education, health, for investments in infrastructure and jobs is being sucked away by debt servicing.
“We know that part of the reason is that interest rates are quite high. So what does it translate into for authorities in Sub-Saharan Africa?
“First, we see that those who have worked on public finances to clear the ground for private capital to come in are doing better.
“When you have a tax/revenue of 26 percent like Cote d-Ivoire, you can bear the debt burden. When you are at 12 percent to GDP you cannot.”
The IMF MD said that the Fund’s major peg of interaction with member countries in the region was focusing on mobilisation of domestic resources, improving public spending and mobilizing local savings with which to achieve growth prospects.
She added that African countries must keep their eyes on inflation, because that problem remains unsolved.
Ms. Georgieva noted that Africa was blessed with a huge potential, with a huge youth population that was eager to work and that its leaders should allow Africa’s resources to work for Africans to bolster economic growth.