The World Bank’s Chief Economist for Africa, Dr. Albert Zeufack, has expressed deep concern over the continent’s rising public debts.
He cautioned that the large borrowing was leading to debt unsustainability and said that needed to change.
He described Africa’s debt situation as “actually quite pre-occupying” adding that, “some will say alarming”.
He was speaking at the world’s maiden 24-hour economics marathon held in Accra.
Dr. Zeufack said in the past 10 years, debt to Gross Domestic Product (GDP) ratio had averaged 50 per cent in the continent and in some handful of countries the debt to GDP ratio was above 100 per cent.
The event was held to discuss, debate and draw attention to some of the most important development issues in contemporary times.
The live-streamed interaction, dubbed “the Econ-o-thon” featured 46 World Bank Group economists together with other guest speakers, and it was broadcast from five countries – Ghana, Bangladesh, Jordan, Malaysia and the United States.
Dr. Zeufack said: What we are seeing is increase in debt ratio. What is even more interesting in my perspective is the changing composition of African debts.”
In the 1990’s it was the crisis of concessionary loans but the structure of African debts had become more private, more non-concessionary, and more market led.
He noted that a number of African countries were now issuing euro bonds to finance their needs
“And that debt has also become therefore, more costly, raising issues of sustainability. The focus on the rate of debts is important but what is even more important is how sustainable is our debts?”
Dr. Zeufack said there were presently 18 countries in Africa that were in high risk of debts sustainability.
“There is one country in Africa that spends 90 per cent of its fiscal revenue in just debt servicing and salaries.
“So, there is almost nothing left to finance education, health and to build the human capital and productive assets that should power growth, going forward.
“We cannot afford to stay in that path. We cannot allow our countries to really come back to that situation.”
He spoke of a recent study by the World Bank, which showed that many of the countries in the continent were borrowing not for investment but for consumption.
“You would agree with me that it is not going to pay for itself. For countries that are investing in debts, we find that the efficiency of investment is very low.”
Dr. Zeufack said loading up on debt was certainly going to affect budgets of the countries and become unsustainable, something which would send signal to the market that “we are not serious”.
“So, when you get into that sphere of high risk of debt distress, it sends a signal to the market that you have become a big risk.”
He said taxing the people to service debts might be unsustainable.
He reminded everybody that when the debt of a country was too high, investors would anticipate that it might increase tax, to reimburse or pay back the debt, so they would stay out or wait until they were secured.
He added that, if there was no private investment, there would be no job creation in a country.
Mr. Pierre Laporte, World Bank Country Director for Ghana, said there was the need to ensure adequate electricity supply in Africa to accelerate the continent’s socio-economic development.