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Debt in Africa Africa should find new ways to finance development - UNCTAD

The report, Economic Development in Africa Report 2016, said domestic resource mobilization on its own cannot resolve all of Africa's financial needs.

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The report, Economic Development in Africa Report 2016 , said domestic resource mobilization on its own cannot resolve all of Africa's financial needs. play

The report, Economic Development in Africa Report 2016, said domestic resource mobilization on its own cannot resolve all of Africa's financial needs.

(File Photo)

The United Nations Conference on Trade and Development (UNCTAD) has warned African governments to add new sources of revenue to finance infrastructural development, warning of unsustainable debt in some countries.

The report, Economic Development in Africa Report 2016, said domestic resource mobilization on its own cannot resolve all of Africa's financial needs.

"Given the complexity of Africa’s development challenges, scale of its development finance needs and severity of its capacity constraints, domestic resource mobilization on its own cannot resolve all of Africa’s financial needs. In addition to fiscal resources and domestic savings, it is optimal, and inevitable, that African countries leverage alternative sources of finance," the report said.

The report highlighted the need to explore new revenue sources such as remittances and public–private partnerships, and clamp down on illicit financial flows.

"In deficit-driven economies, remittances thus ease the balance-of-payments gap and result in less need for debt to finance the deficit," the report said.

The report argues that African countries should look for complementary sources of revenue, including remittances, which have been growing rapidly, reaching $63.8 billion to Africa in 2014.

Borrowing can be an important part of improving the lives of African citizens,” UNCTAD Secretary-General Mukhisa Kituyi said in a press statement on the report. “But we must find a balance between the present and the future, because debt is dangerous when unsustainable.”

At least $600 billion will be needed each year to achieve the Sustainable Development Goals in Africa, according to the report which is subtitled Debt Dynamics and Development Finance in Africa. This amount equates to roughly one third of countries’ gross national income. Official development aid and external debt are unlikely to cover those needs, the report finds.

In addition, the report said a decade or so of strong growth has provided many countries with the opportunity to access international financial markets. Between 2006 and 2009, the average African country saw its external debt stock grow 7.8 per cent per year, a figure that rose to 10 per cent per year in 2011–2013 to reach $443 billion or 22 per cent of gross national income by 2013.

Several African countries have also borrowed heavily on domestic markets, the report finds. It provides specific examples and analyses of domestic debt in Ghana, Kenya, Nigeria, the United Republic of Tanzania and Zambia. In some countries, domestic debt rose from an average 11 per cent of gross domestic product in 1995, to around 19 per cent at the end of 2013, almost doubling in two decades.

Many African countries have begun the move away from a dependence on official development aid, looking to achieve the Sustainable Development Goals with new and innovative sources of finance,” Dr. Kituyi says.

The Economic Development in Africa Report analyses major aspects of Africa´s development problems and policy issues of interest to African countries. It makes policy recommendations for action by African countries themselves and by the international community to overcome the development challenges that the continent faces. The report has been published annually since 2000.

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