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Africa's problem is not debt but poor investment, experts say

By EDITH MUTETHYA in Addis Ababa, Ethiopia | China Daily | Updated: 2019-12-11 11:29

The debt levels of some African countries have sparked fears that the continent is headed toward a crisis. Experts, scholars and government officials from both China and Africa, however, argue that there is no reason for alarm and that debt in itself is not a problem: The problem is how Africa invests the billions of dollars needed to reach its sustainable development goals.

The experts were speaking at a side event of the International Conference of China and Africa: Jointly Promoting Sustainable Development, which was held in Addis Ababa, Ethiopia, on Friday.

According to the International Monetary Fund, the median level of public debt of all sub-Saharan African nations at the end of 2017 exceeded 50 percent of their total GDP. In addition, 40 percent of low-income developing countries in the region have slid into debt distress or are at high risk of it.

Antoine Nkodia, adviser to the prime minister of the Republic of Congo in charge of economy, plan and special economic zones, said claims that Africa's debt is the fault of China take the responsibility away from African states themselves.

"The debt issue may not be a problem. However, if we misuse loans, that becomes a problem, so let's be careful with the language that we use," Nkodia said.

He said there is a need for each country to establish an institutional and organizational framework that structures, coordinates and monitors external debts.

Countries need policies that strengthen debt management and are aligned with the state's financial capacity, Nkodia said.

Thabo Chauke, an economic counselor with the South African embassy in Ethiopia, said African countries should be careful how they use external debts because they might invest in the right project yet still encounter serious problems.

Feng Ming, associate research fellow at the National Academy of Economic Strategy of the Chinese Academy of Social Sciences, said debt is not a problem so long as it can be transferred to valuable and productive assets.

Feng said African countries should try to keep the lending interest rates low to stimulate investment and that their financial deepening should be denominated in the local currency.

"Developing countries should continuously improve their business environment to attract FDI (foreign direct investment) by making clear and easy access, approval, supervision, tax incentives and financing," Feng said.

He said countries can also commercialize operations of infrastructure projects. This ensures that operating costs are controlled and revenue generation is improved.

 

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