A Lecturer of Econometrics and Micro-economics at the University of Zambia, Chrispin Mphuka says African countries, Zambia inclusive need to develop strict rules against debt contraction in order to avoid debt distress.
Dr.Mphuka says politicians must not borrow for political appeasement on behalf of citizens.
As of 2017, 19 African countries had exceeded the 60 percent debt-to-Gross Domestic Process threshold set by the African Monetary Co-operation Program (AMCP) While 24 countries had surpassed the 55 percent debt-to-GDP ratio suggested by the International Monetary Fund.
As at 31 July 2019, the IMF reports that 37 percent of Sub-Saran countries are either in debt distress or at risk of debt distress, within the Southern Africa region, Mozambique and Zimbabwe are in debt distress already while Zambia is at high risk of debt distress.
“We [Africa] are not yet at pre-Highly Indebted Poor Countries (HIPC) levels of debt but the concern is that the debt [in Africa] is rising at a faster rate than before. The fact that debt is now either commercial (by private banks and bond holders) or bilateral, poses a serious doubt for another debt relief .If necessary Africa countries need rules rather than discretion in debt contraction,” Dr Mphuka added.
Dr. Mphuka notes with concern that rising domestic borrowing is crowding out private sector and dampening economic growth.
He said this when he made a presentation during a public debt symposium spearhead by the Consumer Unity Trust Society in Lusaka this morning (Friday AUGUST 30).
Dr Mphuka added that the lack of proper project appraisal to ensure value for money and to guarantee that borrowed funds are spent well, declining growth driven by commodity price shocks (Still mostly commodity dependent), electricity deficits are some of issues that need to be address urgently.
He further notes that “increasing domestic resource mobilization” is crucial but was quick to stress the need for austerity measure if sub-Saharan Africa is to move to prosperity.