Warning Africa on debt, UN urges new financing sources

By Magdalene Mukami

NAIROBI (AA) - Africa should find alternative ways to finance development, as the continent is amassing a large, unsustainable debt, warns a new report by a UN trade, investment, and development body released Thursday in the Kenyan capital Nairobi.

The 156-page 2016 Economic Development in Africa report by the United Nations Conference on Trade and Development (UNCTAD), now meeting in Kenya, calls for substantial financial resources in Africa as the global development finance landscape is fast changing from a model centered on official development assistance to a framework with greater emphasis on the mobilization of domestic resources.

“A major challenge for Africa is the growing public debt which is not sustainable,” said UNCTAD Secretary General Mukhisa Kituyi. “Although the level of debt appears manageable, we have witnessed a rapid expansion of public debt over the years, which is a main cause of concern.”

Kituyi said that although borrowing might be good for the continent to improve the lives of Africans in the short term, “we must find a balance between the present and the future, because debt is dangerous and unsustainable.”

The report, subtitled “Debt Dynamics and Development Finance,” shows that Africa needs $600 billion annually to successfully meet the UN Sustainable Development Goals, which are roughly one-third of the continent’s gross national income.

The UN says that between 2006 and 2009 the average external debt of each African country rose by about 7.8 percent every year, but that this shot up to 10 percent annually in 2011-2013.

Kituyi said, “Many African countries have begun the move away from dependence on official development aid, looking to achieve the sustainable development goals with new and innovative sources of finance.”

Such revenue sources include public and private partnerships, remittances, and a clampdown of illicit flows.

The report recommends that African countries need to leverage all possible sources of finance to minimize both domestic and external debt, adding that volatile commodity markets and unstable international markets make debt a more problematic financing instrument for Africa which should thus be avoided.