ECA's Economic Report on Africa reveals high debt-driven capital flight

http://www.ethiopianreporter.com/eng_newspaper/Htm/No361/r361new.htm

6/08/2003

* Amoako says positive dialogue on to find a new, amenable debt analysis

By Zerihun Taddesse

"Roughly 80 cents on every dollar that flowed into Africa from foreign loans flowed back out as capital flight," the Economic Report on Africa 2003, UNECA's flagship annual publication, said. According to the Report, entitled "Accelerating the Pace of Development," the high amount of capital flight was induced by debt, with the consequent need to look over the way debt relief strategies are implemented.

Mr. K.Y. Amoako, the Executive Secretary of the UNECA, declared in an exclusive interview with The Reporter that his organization, which serves as the UN's arm in Africa, was in dialogue with pertinent international bodies and others to find a different mechanism of analyzing the debt sustainability of the low income of sub-Saharan African countries.

The Report further indicated that "every dollar added to the stock of external debt added roughly three cents to the annual capital flight in all subsequent years." That, said the Report, will mean that "debt relief strategies will bring long-term benefits to African countries only if accompanied by measures to prevent a new cycle of external borrowing and capital flight."

A key component in this would be the way in which debt sustainability analysis was conducted. According to Mr. Amoako, the calculation employed currently by organizations like the IMF and the World Bank "is not sustainable any more". He said that countries like Ethiopia, which in his view are doing many things right, are being undone by their inability to achieve debt sustainibility due to various external factors, like the slump in the price of coffee and others.

Accordingly, he said, his organization was engaged in what he called "positive dialogue" with the organizations and others to find a way to take into account the situation in which countries like Ethiopia found themselves. The issue will be the main topic on the agenda of the meeting of officials of the WB, IMF, ECA and finance and economic planning ministers from about ten African countries and others that will be held on October 28, this year in Washington D.C.

In addition to this, the Report indicated that growth in the continent was slackening with 2002 recording just 3.2% average growth, a decrease from the 4.3% average is 2001. It further noted that of the 53 African countries, only five were able to score more than 7% growth rate with Mozambique topping the list by 12%. The same number of countries recorded growth rates in the negative. The rest are in between.

Ethiopia, it said, recorded a 6.2% growth rate, which somewhat contradicts the government's version of things, which projects a 3.8% decline in real GDP for the fiscal year 2002/03. As it goes, some people have found it difficult to imagine the first part of this fiscal year being capped along with early 2002 with a 6.2% growth.