Public debt: embracing the new reality by Le Monde diplomatique

Author:Le Monde diplomatique
Language: fra
Format: epub
Publisher: Le Monde diplomatique
Published: 2020-09-09T00:00:00+00:00

Rafael Correa

Rafael Correa is an economist and was president of Ecuador from 2007 to 2017.

Le Monde diplomatique — Public debt: embracing the new reality

Primary surpluses and cheaper credit

Africa borrows on the open market

The decades when the continent couldn’t raise major funds on ordinary commercial markets are over, but there are still worries about over-indebtedness.

Sanou Mbaye,June 2015

The nations of sub-Saharan Africa, in the post-independence euphoria of the 1960s, wanted to end the international division of labour under which they exported raw materials and imported manufactured goods. They diversified their economies through industrialisation and improved production capacity, but soon encountered the problem that none (except for South Africa and Rhodesia, now Zimbabwe, both then governed by a white minority) could access international capital markets without the credit rating agencies’ approval. They could only use private funds guaranteed by states, bilateral funds lent by the Paris Club (1), and multilateral funds from the IMF, World Bank and African Development Bank (AfDB).At the same time, much-needed export revenue was shrinking, mainly because of a global fall in agricultural commodity prices (the index went from 155 in 1977 to 94 in 2002), while the cost of Africa’s imports climbed. In 1979 a rise in US interest rates — a unilateral decision to halt the depreciation of the dollar — significantly worsened Africa’s debt burden.

To improve their finances, African nations turned to international institutions, which dispensed their “deadly medicine”, imposing development and structural adjustment programmes, financial deregulation, free trade, privatisation, and wage and budget cuts. These programmes proliferated, all prescribing the same neoliberal, free trade mix.

Under the Heavily Indebted Poor Countries initiative (HIPC), launched in 1996, 36 countries (30 in Africa) benefited from debt relief of $76bn on bilateral and multilateral debt. According to the Committee for the Abolition of Third World Debt (CADTM) these measures are window-dressing: sub-Saharan Africa’s outstanding debt rose from $2bn in 1970 to $331bn in 2012. Over the same period, repayments totalled $435bn, four times the capital borrowed (2).

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