As Greece struggles to get through its debt crisis, it is high time we had a
look at the African economy , the situation
with the African debt has worsened, with the
IMF warning about the uncontrollable debt rise.
Could a country whose debt increased by
13.4% and GDP grew by 12.7% in the same
year be considered a fast-growing
economy? What if the contracted debt had
interest rate at 6%, would the country still be
a fast-growing economy?
That is the story of Ethiopia, one of the
media-heralded fast-growing African
economies.
Now let’s take a look at the consolidated
2010 data sets of ten African countries
labelled “fastest-growing economies” by the
international press.
Uganda’s debt grew by 12.5% while its GDP
increased only by 6.2%. Zambia’s debt
increased by 12.2% while its GDP grew by
7.6%. Cameroon’s debt grew by 9.1% while its
GDP increased by 2.4%. Angola’s debt grew
by 9.1% while its GDP increased by 3.4%.
Ghana’s debt grew by 8.8% while its GDP
increased by 8%. Ivory Coast’s debt grew by
9.1% while its GDP increased only by 2.4%.
Nigeria, one of the least-indebted African
countries, increased its debt by 6.5% while its
GDP grew by 8%. Senegal’s debt increased by
4.2% while its GDP grew by 4.3%. Kenya’s
debt increased by 5.6% while its GDP grew by
5.8%.
One could easily dismiss our comparison of
debt to GDP growth on the ground that debt is
often contracted to make investments, which
would impact GDP only in the upcoming
years.
The above argument would be valid at only
one condition: if African economies grew by
at least 6 to 8% every year just to be able to
pay the interest of their commercial debt, and,
more so, to pay off the debt at maturity and
still have money left to develop local
infrastructure without continuing to borrow for
growth.
To paint a much darker picture of the
predicament of our debt increase, let’s add to
the debts’ interests rate the continued
depreciation of African currency against the
US dollar and the euro. From 2000 to 2013,
average annual currency depreciation in sub-
Saharan Africa was 3-4%, amounting to 44%
cumulatively over the decade, according to
“Regional economic outlook. Sub-Saharan
Africa,” a survey by the IMF.
Unsurprisingly, the current ratio of debt to
GDP of the majority of African countries is
moving over 50%, which means their
cumulative debt is equal to half of their GDP.
That’s very high.
Unfortunately, deceptive economists are
telling our countries that their ratios are less
than the ones of the developed countries like
the US, which is 95% of its GDP, UK, 400% of
its GDP, EU with 85% of their GDP.
According the Jubilee Debt Campaign (JDC)
policy officer, Tim Jones, African countries
should be careful while comparing their ratio
to the ones of the rich countries. “As well as
owing large debts, countries such as the US and
the UK also have large debts owed to them.
Most of the debt owed by and to the UK is
through banks, rather than the government.
Taking account of debts owed to the UK,
whether to the government or private sector,
external debt is around 20%. This is lower than
many developing countries, as well as EU
members such as Ireland and Spain,” he
declared .
Put simply, the real ratio to debt of rich
countries is only 20%, while the one of African
countries is moving to over 50%, regardless of
the fact that many African countries had
recently rebased their GDP to look much
bigger. Ghana had increased its GDP by 60%
just with clever mathematical formula
invented by international financiers. Nigeria
went through a similar process of GDP rebase
to become the biggest economy in Africa.
The above statement means that, without the
GPD rebase gimmicks, our countries’ debt to
GDP ratio might be much larger, even
worrisome.
We have all heard about the ‘Africa Rising’
rhetoric. The story goes like this: Africa is the
new frontier of opportunities. With double-digit
growth in many sub-Saharan African countries ,
it’s time to take Africa seriously and seize
opportunities.
The well-orchestrated media coverage of that
narrative resulted in an accelerated growth of
direct foreign investment in Africa but also in
new channels of financing like the Eurobonds.
Not all debts are bad, but as Nobel prize-
winning economist Joseph Stiglitz put it: “The
financial sector loves to find people to prey on,
and their most recent prey are governments in
developing countries. They get overindebted,
they get a bailout from the World Bank and the
IMF and they start over again. I think it’s
unconscionable, but their memory is short and
their greed is large, so it’s going to happen
again.”
Nick Dearden, the director of the World
Development Movement, advised developing
countries to use borrowed funds to reduce
commodity dependency: “Getting more
minerals out of the ground may be very
beneficial for Western nations … but if it’s not
developing African economies in a genuine way
they’re likely to be left with the debt and none
of the resources they’ve invested in.”
Funny enough, in order to get the money
back, the main goal of fighting corruption in
Africa is not to reduce poverty or improve
good governance anymore, but to make sure
African countries can pay back their debt to
their commercial creditors, the IMF and the
World Bank.
It’s likely that poverty rate would continue to
increase on the continent, because there
would be no money left for social
development, regardless of GDP growth. All
the net value created by Africans would be
transferred out of the continent. The future of

Sources: Naij.com news

Why would free man come and buy land here then introvert will follow

axiliborha:
Why would free man come and buy land here then introvert will follow

You didn't reply my mail love

Freemanan:

You didn't reply my mail love

hmm oya let me be the first to comment then I will reply

axiliborha:
hmm oya let me be the first to comment then I will reply

You have a green light then...

Freemanan:
You have a green light then...

lol...Jk

axiliborha:
hmm oya let me be the first to comment then I will reply

malo babe,how is ramadan

2kris:
malo babe,how is ramadan

Iweala and her friends have completed their hit Job on the continent

axiliborha:

u heard me sweerryy

No need to fret much

You have to remember that there was a "collapse in commodities prices last year and mst African countries are commodity dependant!

This may explain a lot of things

African countries should try to keep their budget deficits below 3% f GDP