Addis Ababa, Ethiopia, December 10, 2020 - African countries must be more transparent and accountable when managing sovereign debt amid rising concerns of impending debt distress engulfing the continent. Experts issued the warning on Thursday during a special session on the final day of this year’s African Economic Conference (AEC).
This comes partly because public external debt in sub-Saharan Africa is on the rise. According to World Bank data, 18 countries are at high risk of debt distress – a number that has more than doubled since 2013 - while eight countries are already in distress. The COVID-19 pandemic has worsened the situation.
The experts, representing governmental bodies, development finance institutions, civil society and international think-tanks, were discussing “Harnessing Africa’s on-going initiatives to better prepare for future emergencies”. The conference, held virtually for the first time, was themed, “Africa beyond COVID-19: Acceleration towards inclusive and sustainable development.”
Speaking at the session, Dr. Misheck Mutize, Head of Credit Ratings Department, African Peer Review Mechanism, observed that the COVID-19 pandemic had complicated the current difficult position where countries had already accumulated debt. Now, faced with increasing financing needs for healthcare and reviving the economy, the debt burden is rising.
“The countries give a skeleton of information about why they are borrowing. There is a need for transparency when countries are taking on sovereign debt,” Dr. Mutize said.
He pointed out that the issue is not about how much debt has been accumulated, but rather the high servicing cost driven by higher borrowing rates.
This, he noted, is linked to a lack of transparency as many African countries are reluctant to get credit ratings, which provide investors with specific insights into the creditworthiness or the ability to repay, and the level of default risk associated with investing in a particular economy.
“The continent cannot afford to continue borrowing at very high-interest rates,” Dr. Mutize said, adding that countries also tend to borrow short-term for long-term projects, including infrastructure projects which are not viable in the short-term, making it difficult to repay.
Theo Chiviru, Team Lead for Africa and Asia, Open Government Partnership, reiterated calls for transparency, pointing out that there is still a lot of secrecy around borrowing and how debt is managed on the continent.
“African citizens need to know there is a need for public oversight over the money borrowed and how the funds are spent. An open government approach is a vital tool in achieving inclusive and sustainable growth,” he said.
Chiviru added that fair taxation policies would be critical to protecting the most vulnerable and marginalized, who continue to be disproportionately taxed by consumption taxes.
Elizabeth Ampairwe, Programmes Director, Women and Leadership, Forum for Women in Democracy, Uganda, highlighted the need to appreciate that women have disproportionately been affected by the pandemic due to their multiple roles as frontline workers such as nurses and caregivers.
Hence, there is a need to allocate more resources to help women and craft gender-inclusive policies. Failure to address this, she argued, will see African governments risk reversing gains in gender equality and parity.
Henry Kilonzo, Senior Manager, Foundations Programmes, Safaricom in Kenya, noted that the pandemic had provided the telecom sector with an opportunity to innovate, enabling cashless transactions, micro-credit to the most vulnerable and increased bandwidth coverage to facilitate remote work and learning.
To sustain the momentum, he urged governments to scale up infrastructure investments to improve connectivity to address the existing inequality, which is a threat to inclusive growth.
Plenary Session 4: Harnessing Africa’s on-going initiatives to better prepare for future emergencies (UNECA) by Bernadette Namata