UNCTAD, the United Nations Conference on Trade and Development, has warned African governments against accumulating unsustainable debt, saying there is need to find a balance between the structural needs and pressures of the present and the demands of the future.
The UNCTAD Economic Development in Africa Report 2016 makes it clear that although Africa’s external and domestic debt ratios appear manageable, Zambia together with other nations in similar circumstances, must take action NOW to prevent the debt from ballooning into a crisis resembling the dark days of the late 1980s and 1990s.
Although borrowing could be an important strategy for developing nations to find the resources to fund their budgets and programmes to fight extreme poverty and improve the lives of millions of their people, the report cautions politicians and bureaucrats to be aware that debt was dangerous when unsustainable.
Zambians may recall that in February this year Finance Minister Alexander Chikwanda assured the country that although Zambia’s external debt as at December 2015 stood at US$6.4 billion, representing 38.7 percent of the Gross Domestic Product (GDP), it was still below the internationally accepted threshold of 40 percent and therefore manageable.
Mr Chikwanda told Parliament then that when domestic debt was included, the ratio of total public debt was 52.7 percent, again below the international accepted standard of 56 percent, assuring Zambians that the policy of the Patriotic Front government was to limit borrowing to sectors that underwrite future growth.
What is refreshing about the UNCTAD 2016 report, which focuses on Zambia, Ghana, Kenya, Nigeria and Tanzania, is the call for African countries to explore new revenue sources to finance their development.
It proposes that it is critical for Zambia, for example, to encourage and give incentives to their nationals in the Diaspora to grow our economy through massive remittances of their earnings abroad. This avenue of self-sustenance has proved very effective and is underpinning the economies of war-ravaged countries like Somalia.
One other method of finding money for development is for countries such as Zambia to be ruthless and put stringent measures in place to plug the black hole in African economies through which billions of dollars are siphoned from these countries by crooked multinationals and so-called investors through illicit financial flows.
It is estimated that Africa loses US$50 billion a year through illicit financial flows where foreign conglomerates posing as Good Samaritans and investors claim to create thousands of jobs in these impoverished economies and pay millions of dollars as tax to government. But unknown to these unsophisticated governments is the fact that these same companies are remitting to their foreign shareholders and tax havens millions of dollars monthly through various fraudulent schemes to beat the local taxman.
As Africa scouts for at least US$600 billion a year to meet the benchmarks of the United Nations Sustainable Development Goals which focus on equitable development, eradication of poverty and environmental sustainability, it is vital that Zambia must learn to depend on her ingenuity and the strong will of her people to develop.
Long gone are the days when developing countries looked to cooperating partners, the International Monetary Fund and the World Bank to finance our national budgets. As rich nations become more and more arrogant and want to use their financial muscle to interfere in our sovereign institutions, it has become apparent to African states and governments that it pays to live within your means.
Only then can Africa, and Zambia in particular, claim to be truly independent.