Tag: Debt

Liberating Africa from the IMF Debt-Trap

There were times when there riots in Africa, demonstrations against the IMF because of the policy advice they were giving, the conditionalities they were imposing and the difficulties that arose out of the implementation of those conditionalities. – Jakaya Kikwete, former President of Tanzania

I am a child of the 1990s, I grew up in Kenya when the economy was crap, and the politics was hot. Something I used to hear a lot about on the news at the time was the IMF, alongside words like reform, privatization, and taxes.

Today it feels like a bad remake of the film ‘Back to the Future’ because the economy is crap and the politics is hot, and the IMF is driving economic policy. Today Kenya is implementing broad tax increases on fuel, incomes, imports, and businesses and even mulling carbon taxes on the advice of the IMF. Privatization is top of the agenda and ‘reform’ is everywhere, conditions of the IMF program that the country has entered because of fiscal distress. Kenya is not the only country on the continent under an IMF program, Ghana, Zambia, Mozambique, SA etc. are all under IMF ‘guidance’.

In the 1990’s under the structural adjustment programs imposed the IMF, African countries were forced to liberalise their economies, sell off state assets, pull down trade barriers and dismantle social safety nets. Causing immense pain and hardship on the back of policies dictated by disconnected bureaucrats and economists in Washington. Today, African countries are being advised to increase taxes, remove cushioning subsidies and tax breaks, let the value of currencies depreciate and sell off state assets, that are once again causing immense pain.

How did we get back here? How do we get out of it again? Most importantly how do we make sure that it never happens again?

How did we get here?

Getting out of the clutches of the IMF in the first couple of decades of the 2000’s took a lot of hard work, a booming Chinese economy and debt Jubilee from the west. How did we get back here? As with most things it was a combination of stupidity, naivete, and bad luck.

Stupidity: We borrowed too much for projects with disappointing returns (like Kenya’s SGR) or it was outright stolen like the tuna boat scandal in Mozambique. Essentially wasting the money that we had borrowed.

Naivete: After the financial crisis of 2008-09 money in the developed world was cheap, with 0% interest rates. Thus, that money needed by investors, pension funds, banks etc. was looking for returns. African governments seeing cheap money looking for a place to go, floated all manner of Eurobonds, dollar bonds and took syndicated loans and with our aforementioned stupidity, we spent it on the wrong things.

Bad Luck: The Covid-19 pandemic gave every economy a kick in the teeth, stopping growth and investment and then in 2022 the perfect storm hit, inflation forced interest rates up and the cheap money disappeared, at the same time those increased interest rates made the dollar much stronger, thus debt payments had higher interest rates and a dollar penalty. The war in Ukraine caused global food and energy prices to increase steeply, and with most African countries being net fuel and food importers., those imports got more expensive.

How do we get out of it (again)?

In the early 2000s African got lucky on two fronts. The Chinese economy boomed driving demand and prices of the raw materials up and providing a much needed boost for African economies after the IMF induced stagnation of the 1990s. Secondly, many African countries were granted debt relief under the highly indebted poor countries initiative, giving much breathing room to African economies that had been struggling under a significant debt burden. However, the continent cannot rely on lightning striking twice, thus we must actively put in place solutions that get us out of this situation.

Tax reform

First, Africa needs more of its own revenue, which means taxes. However, unlike the IMF’s advice African governments should not be putting additional taxes on their already overburdened citizens who make up their narrow taxbases. As I have written about previously by reforming the tax regimes for natural resources, targeting tax avoidance by multi-nationals, and expanding the tax base, African countries can expand their revenue collection without squeezing their citizens for little gain, with higher income and consumption taxes as many are doing on the advice of the IMF.

Spending Cuts

Second, spending cuts. Governments, particularly African governments waste money on unnecessary or silly things. The most glaring example is Ghana’s national cathedral. Focusing spending on the fundamentals, paying salaries, delivering services and key development projects, while cutting unnecessary spending would give governments some breathing room and ease the crowding out effect in domestic debt markets that is seeing governments borrow every cent they can, leaving little for the private sector to borrow, limiting investment and growth.

The IMF

Third, use the IMF. Not the institution, but its assets through something called Strategic Drawing Rights (SDR) these are interest bearing international reserve assets of member countries of the member countries of the IMF. SDRs are allocated to IMF members in proportion to their quotas of shares. SDR’s are held by states or specified institutions such as the Africa Development Bank (AfDB) as part of their forex reserves or they can be used to pay the IMF for loans or transactions. Many wealthy countries are holding SDRs that they do not use, and in the past the G20 pledged to reallocate $100 billion worth of SDRs to Africa. The Africa Development Bank has calculated that with its AAA credit rating it could leverage the funds as much as 4 times, meaning $100 billion could deliver $400 billion to African economies. Part of that could be used to help African countries refinance and restructure, dollar-based debts.

For instance, Kenya has $2 billion dollar bond payment it must pay in 2024. If it defaults, it would be disastrous to its economy and currency. If it tried to finance the payment through its own revenues it would cripple the government requiring massive cuts to services and personnel. If it tried to refinance the bond through international markets the interest would punish the country for years to come. If through the AfDB Kenya was able to refinance the bond, at favourable rates, for a period of time that made sense, Kenya bond holders would be paid back, and the country would get the economic and fiscal breathing space it needs to invest in development and not tax its private sector and citizens to desperation. This wouldn’t be a bailout or debt Jubilee, in the end Kenya would pay the money back to AfDB. There is no need for the painful choices Kenya and many other African states are being forced into, when the AfDB could use already pledged assets to solve the problem.

How do we make sure it never happens again?

Assuming we can find our way out of this mess, how do we make sure that Africa never loses its economic sovereignty to the IMF or other non-African institutions again. It won’t be easy, and it won’t be simple, but it is worth doing.

Discipline. African countries need to develop fiscal discipline, the days of presidents and political leaders using treasuries as personal playthings must end. If not the vanity projects, white elephants and waste will continue to drive bad debts and IMF bailouts.

African Capital Markets. As the continent comes closer together around trade, climate issues, and payment systems, we should add capital markets to that list. Why go to Europe or America to float sovereign bonds or raise capital, why not do it in Africa. Raising money from markets and investors that better understand and appreciate Africa. Most African markets rely on a combination of domestic markets, draining capital away from the private sector, and unreasonably expensive Eurobonds and syndicated bank loans. Developing regional/pan-African capital market would open a new venue for African countries to borrow potentially in their own currencies.

Expertise. Many of the African finance ministries who “took advantage” of international capital markets over the last two-decades, have, unfortunately shown that they do not fully grasp the complexity and repercussions of these markets. Thankfully long-gone are the days where there are not enough Africans with the right type of skills. There are more than enough qualified African bankers, financial experts and advisors who have worked from wall street to Hong-Kong executing complex transactions and trading in these markets. It is time to bring this expertise in house. Debt departments at ministries of finance need these people staffing them to develop viable debt strategies that are built for long term sustainability.

Conclusion – Back to future

In the film back to the future the protagonist, who went back in time eventually goes back to the future, safe, sound and more secure than before. We must strive for the same for the future of the continent’s fiscal well-being. A prosperous future for Africa, requires Africans being in-charge of our fiscal resources not faceless bureaucrats from the other side of the world. Questions around how African countries tax their citizens, where they spend that tax revenue and what they should be borrowing for should be debated and determined at home not in Washington, Brussels, or Beijing.

Africa is back in the IMF debt trap, and just like in the 1990s African countries are sacrificing their citizens through higher taxes, cutting services, and selling assets as demanded by the IMF in the name of sound economic reform. Getting out of this debt trap will be harder and likely more painful than the last time, but if we don’t our sovereignty will continue to be second class.

Focus on FOCAC: what was missing.

Last week the triennial Forum On China Africa Cooperation (FOCAC) took place Beijing. The summit came in the midst of growing questions (particularly from the western media, academia and governments) about China’s ‘debt diplomacy’ and pushback from China that the west is simply trying to paint a growing and beneficial relationship in a bad light. Debt diplomacy, simply put is the perception that China is using debt as a strategic tool to get strategic assets or trap developing nations desperate for investment (such as African states) in debt laden subservience to China (you can read this if you are interested in further exploring this line of thought). The summit also showed the growing disparity between the West’s diminishing clout in Africa and the growing influence and importance of China. While Angela Merkel, Theresa May who visited Africa, and Donald Trump (who was visited by President Kenyatta) made optimistic statements about being committed to investing in Africa, China pledged cold hard cash, 60 billion dollars to be exact, as the proof of its commitment.

As you will likely notice about both these narratives (debt diplomacy and China vs the West in Africa) is that they are driven by foreign (Chinese or western) concerns and interests. Africa is (worryingly like in the days of the cold war) a battleground for the interests and ambitions of two increasingly competitive power blocs. There is little concern given to the needs and aspirations of African’s, nor how the actions of China or the West can tie into development policy. I blame this on Africa’s leaders who have failed to properly articulate the concerns of African’s in the broader China-Africa relationship, and to strategically think about how to integrate and utilise Chinese investment and geopolitical policy into our own development policy. Secondly, in response to the renewed optimism at the money pledged by China, the devil is in the detail and we got very little of it, beyond speeches and headlines. Third, FOCAC did nothing about the image problem, of both African’s in China and the Chinese in Africa. While our leaders may talk about each other in glowing terms, how their respective peoples view each other and interact will define the relationship going into the future. Fourth, Africa’s debt is a problem and both Africa and China, if they are indeed sincere, need to come up with viable policies to ensure that Africa does not find itself in a debt trap again.

The recent FOCAC summit was notable just as much for what was missing as for what was said. The China-Africa relationship will be a defining feature of Africa in the 21st century, whether its positive will need African policy makers and political leaders to be more thoughtful about that relationship and the policies that actualise it.

1.  Speak up Mr President

49 African heads of state made their way to Beijing for FOCAC, more than went to the last US-Africa summit or TICAD (Japans equivalent of FOCAC) symbolically this just how important China is to Africa. This is not surprising; China has invested and is committing to invest vast sums of money in Africa. In addition, China is offering cooperation and assistance in several areas such as security and combating poaching. While it is not surprising it is also worrying. Worrying because there is no clear articulation of the African position from individual African nations or from regional or continental bodies. What are African countries looking to get out of China, what are Africa’s nations visions of development, and what do we see China’s role in it being, and what we see as a mutually beneficial relationship. African presidents in various forms gave the usual platitudes about the importance of investment and infrastructure, the value of Chinese partnership and their commitment to economic development. There was no clear articulation of the African perspective and this is a problem, because it means that Chinese interests and concerns are driving the relationship and even if there is no malice involved, a one-sided relationship is still detrimental. Even if Africa is the junior partner, a sufficiently articulate, determined and smart junior partner can play a large role in defining a relationship. That is what was missing at FOCAC from Africa’s leaders, a clear conception of a balanced Africa-China relationship, not just an acceptance of a lopsided China-Africa dynamic. What that looks like is up for debate, (I gave my ideas In a previous post), but without a vision we are lost and ripe for exploitation.

2.  The devil is in the details

60 billion dollars. That, amount slightly larger than the GDP of Kenya, will be the figure that defines FOCAC. That China has pledged 60 billion dollars of aid, concessional loans, credit lines, debt relief and grants to the African continent over the next 3 years, and that there will be no vanity projects paid for by that money. Beyond the, 60 billion there were also commitments around security assistance, climate change resilience, anti-poaching among others. However, as with any great promise the devil is in the details.

On the 60 billion dollars what’s needed is specifics of what China considers a concessional loan, what the conditions are for debt relief, the conditions for access to a credit line and the interest payment terms and periods for that credit and what, in the eyes of Beijing, constitutes a vanity project.

On the issue of security assistance. Is it training? More Chinese bases on the continent? Is it domestic surveillance and tracking technology or internet suppression tools (which should scare any African concerned with human rights).

Such, questions abound on a number of areas announced and committed to at FOCAC, unfortunately there are few policy papers, bi-lateral and multi-lateral agreements available to the public or being debated in parliaments around the continent. The devil is in the details and the devil cannot be seen. We have no idea what African leaders have committed in Beijing, thus there is no way for African’s to fully assess and appreciate the relationship with China.

3.  The image problem – race, rhinos and chopsticks

How do the Chinese (the people not the government) view African’s? Judging by the depictions of African’s and black people in Chinese popular media such as the widely watched lunar new year’s show, or the art show which compared black people to animals. It is clear that race is an issue. It is an issue that doesn’t just manifest itself in China but in Africa as well. Around the continent there are numerous instances of African workers on Chinese projects being treated unfairly and even cruelly (as recently came to light in Kenya), building a perception among many African’s that the Chinese are exploitative and disrespectful, and at times this has boiled over into protest .

Stereotypes, unfortunate interactions and cultural misunderstanding are a rather prominent feature of China – Africa relations when you look beyond the high-level government get-togethers. Rather than avoid the issue, issue hasty apologies or outright deny or rationalise the issue of negative perceptions, racism, cultural misunderstandings etc. between ordinary Chinese and African’s, governments on both sides should be attempting to address it head on. This could involve to building contacts that go beyond high-level summits and infrastructure projects. Create spaces where people can interact (such as university exchange programs), where African’s and the Chinese can learn about each other, their diverse histories, cultures, their common experiences of western imperialism, and the different experiences of life across both Africa and China. FOCAC could be the start of a broader relationship between China and Africa that isn’t just about government to government bi-lateral agreements, but a broader relationship between two peoples which could go a long way to providing the basis for a long term mutually beneficial relationship that can go beyond sovereign debt.

4.  The debt dilemma

Despite the Chinese contention that the debt diplomacy narrative is a western fiction meant to paint a negative picture of China to audiences around the world. The truth is that it is a problem. African countries are finding themselves once again straining under increasing debt pressure, and Chinese debt plays a significant role in that (links/graphics). For African nations there is clearly a need to make Chinese financing more sustainable, and unless China is as utterly cynical as former secretary of state Rex Tillerson suggested, then they too have an interest in coming up with ways to make Chinese financing more sustainable for African nations.

This is not something that must or should come from China. The first realisation that must happen in the finance ministries of Africa, is that China is not a benevolent Santa Claus, handing out wads of cash. Debts must eventually be repaid. Second, is coming up with a viable, mutually acceptable framework for financing going forward. This could include a set a of criteria that projects must meet before getting funding or the Chinese Foreign Ministry and EXIM bank working with the African Development Bank, Afriexim bank or the regional development banks to help African governments assess and structure loans to ensure their sustainability. These are just two ideas, fundamentally the point is that China and Africa are not locked into a debt trap path, and with some innovative policy the debt problem could be defused.

Rebalancing China-Africa

I have recently taken my own advice and been reading up Chinese history to gain a greater understanding of a truly extraordinary people. In doing so it is hard not to draw parallels between the past and the present. Around 2,100 years ago Emperor Wu of the Han dynasty established many of the routes and relationships that would come to known as the silk road. He did so with a mixture of diplomacy and conquest. At its height, China under the Han dynasty was trading with the Rome and Parthia to the west and numerous vassal states paid homage to the emperor. Today its President Xi (emperor in all but name) is, through a canny mix of diplomacy, ‘conquest by debt’ and the almighty dollar building a new silk road (it is no coincidence that the Chinese government itself drew explicit comparisons between the ancient silk road and the belt and road initiative). And it was not hard to see the (number) of African presidents in Beijing for FOCAC there to pay homage to the emperor of the rejuvenated 21st century middle kingdom.

China’s ambitions may not be as imperial as its history, however by looking at what was missing from FOCAC, it is clear that not only is the narrative of China in Africa skewed, the reality of the relationship is lopsided as well. This is not due to evil machinations from China. Rather it is due to a failure from African leaders to try and define that relationship beyond the headline figure of how much money Beijing is pledging to invest in the continent. Rebalancing that relationship will require African leaders to develop a vision of what a mutually beneficial relationship between their countries and China looks like. Doing that will require African leaders to develop a coherent vision of what their development goals and aspirations are based on those of their people (something I have talked about at greater length in this post). Once there is a vision it can be articulated, negotiated and integrated into a mutual and more equal relationship between the Peoples Republic of China and the many republics of Africa.

I do not subscribe to the western view that what we are seeing is a cynical 21st century imperialism from China. Neither do I ascribe to the view that China is a completely benign partner for Africa and is not pursuing its own strategic interests. What I am is an African, who wants to see our continent develop a mutually beneficial relationship with a remarkable nation, that is a world power and will likely be a superpower. Doing so requires being realistic about Africa’s relatively weak bargaining position, but it also demands vision and strategic thinking, which will form the basis of policies that will ensure that Africa does not find itself holding the short end of the stick again. I sincerely hope that African leaders and policymakers are not thinking about what happened in Beijing last week, but rather are thinking about what could happen at the next FOCAC in 2021.

 

Ending the African debt trap: A developmental debt policy framework

“We have been indebted for fifty, sixty years and even more. That means we have been led to compromise our people for fifty years and more.” – Thomas Sankara OAU July 1987

In 2005 developed countries wrote off billions in debt accumulated by Highly Indebted Poor Countries many of those in Africa. Debt relief gave many countries some breathing space from crushing debt and structural adjustment programs that saw public services decimated, and development expenditure minimised. Over a decade later much of the continent is walking into the same trap, accumulating foreign currency denominated debt with very vague ideas of how we are going to pay it back (figure 1)[1].

If we are not careful many African nations will find themselves where they were in the 1990s (some like Ghana already have); cutting spending and services to get IMF bailouts so that they can pay their debts.

As Thomas Sankara alluded to in 1987 this is no way to develop a continent, because in the world of international finance, banks and bondholders do not care about your people, they just want to be paid back on time. When it comes time to pay back this current binge of debt of what African nations are accumulating, just like in the 1980s and 1990s it will be the people who suffer, making the claims of leaders justifying this debt in the name of development a cruel joke.

African governments need to learn how to borrow smartly and use the money prudently. In my view African governments need to develop a framework through which borrowing is assessed; based on a set of principles that benefit Africans rather than burden them. Ending the African debt trap doesn’t mean ending African debt, it means making it work for us.

Debt: Bonds, Loans and Guarantees.

Governments in Africa borrow and accumulate debt in three primary ways. First, by issuing bonds, where investors lend money to the government by buying the bond who in turn promise to pay investors back in full, with regular interest payments[2]. Loans are straight forward, and work in the same way as a bank loan you would get. The main sources of government loans are international banks, multinational institutions like the IMF or World Bank and direct loans from individual states. Guarantees are slightly different, the government does not borrow directly but guarantees the debt of a company, usually a state-owned company, so that if it fails to repay its loans the government has to repay them.

Debt is not inherently a bad thing. It allows you to access funding that you do not otherwise have to invest in growth. For companies, debt is used to fund expansion, new machinery, hire more workers etc., to grow it is revenues. For countries debt can be used to fund investments in the country beyond what is available from tax revenue. It gives government the ability to invest in areas such as infrastructure, education, industrial or agricultural initiatives that give people and wider economy a higher capacity for growth and development. Put simply if you use debt to invest areas that create more value than the value of debt then you are fine, as the debt will pay itself back.

The problem with African debt

Debt becomes a problem when you have trouble paying it back. As your debt load increases you start borrowing money simply to pay for earlier debt, like using a credit card to pay off another credit card. Eventually you are forced to ask for help, going cap in hand to your creditors and asking for a bit more time or to the IMF for a bailout and as Africa discovered in the 80’s and 90’s, when that happens your fate is no longer in your hands.

In Africa bad debt falls into 3 broad categories. The first is corruption and misuse, where money borrowed is not even used in any form of gainful investment but essentially stolen. Mozambique was one of the success stories of the last few years with 7%+ growth rates even as it borrowed heavily (Figure 2).

Investors were not concerned with the debt levels because of Mozambique’s huge gas reserves. In 2013, Mozambique borrowed $850 million dollars to invest in a new tuna fishing fleet meant to jumpstart the countries fishing industry. However, Mozambique did not buy fishing boats, it bought gunboats, and shortly afterward it emerged that the government had been hiding an additional $1.4 billion of in loans whose use is shrouded in mystery. By 2016, Mozambique was unable to pay its loans and it defaulted on its debt. Mozambique is now in the arms of it is creditors and the IMF. When its gas fields start producing commercial gas in 2023, the money will go towards paying its loans first before it goes to the people of Mozambique.

The second way African debt tends to get out of hand is through investment in misguided projects, otherwise known as white elephants. These projects are often pursued for political reasons such as being in the part of a country the minister comes from, or connected people getting the contracts rather than development objectives being main goal. Today there is a building frenzy across the continent as governments invest in infrastructure to boost economic growth. This infrastructure is expensive, and governments have to borrow to fund it and it is a large part of the significant increase in debt on the continent over the last few years. If these roads, railways and dams are white elephants and provide little value to communities and countries they are in, Africans will be saddled with debt for vanity projects.

The third way in which governments accumulate debt is through providing guarantees to state-owned companies who take on debt for a variety of purposes. However, many state-owned enterprises in Africa are poorly run, with spotty oversight and take out debt for poorly conceived expansion plans or to fulfil poorly thought-out political directives. Eskom is South Africa’s publicly owned electricity monopoly, but it is in dire condition. Mismanagement, corruption, old power generation plants, expensive construction of new plants and a failure by the government to let it raise tariffs has put Eskom into a precarious position. Eskom has over the years borrowed to cover the gaps using government guarantees. According to figures provided by the power utility, total debt amounted to R359 Billion (29 Billion Dollars). This amount of debt, as the finance minister recently conceded is a threat to the South African economy. And Eskom is not the only state-owned enterprise in South Africa in trouble. Government guarantees to state owned enterprises stood at R467 billion at the end of 2015/16. Standard & Poor’s forecasts they will swell to over R500 billion by 2020 – 10% of South Africa’s current GDP, adding to South African debt that is already worth over 55% of GDP.

The problem with African debt is that too much of it is ill-considered, too much of it is stolen and most of it is not put into smart investments which will improve people’s lives and create value.

The trap closes – International control.

A key feature of international debt markets that puts the continent at a distinct disadvantage is who controls the debt. Creditors are not usually terribly concerned with what governments do with debt as long as it is paid back. Thus, when governments get into tight monetary circumstances, creditors usually demand that actions be taken to ensure that the debts are paid. The vehicle for this is usually the IMF, the multinational institution charged with securing global financial stability and debt defaults are bad for stability. When the IMF comes in to bail out a government it comes with conditions and as Africans found out in the 80s and 90s (and as Greeks are experiencing now) those conditions are painful. They usually involve a mix of cutting government spending and services, raising taxes and cutting subsidies, privatising public services, selling public assets, cutting the number of government employees and limits on development, spending and investment. With African governments piling up more and more debt we are getting closer to being subject to IMF conditionalities again, and the pain and protest seen in Greece will become a feature in Africa.

A Developmental Debt Policy Framework

The question becomes, how do we make sure any money we borrow is good debt. How do policy makers, politicians and the wider public decide what is worth borrowing money for? If Africa is to end the debt trap cycle it must change the way it decides to borrow, if African countries need to borrow money to fund development expenditure, then we must have something that guides that process. This requires a developmental debt policy framework, that is based on a set of principles that guides various actors as they decide whether the government should be borrowing money. The principles upon which responsible developmental debt would be based are simple. It must be sustainable, valuable, and accountable. These three principles would answer the key questions of why we are borrowing, how are we borrowing, can we afford it and will it create value for the country.

Sustainable

Put succinctly, sustainability in debt is about the ability of country to afford the debt. Can the money borrowed, both the principal sum and interest, be paid back by either normal revenues or by the revenues generated project being funded, without requiring extra burdensome measures, such as additional taxes or cutting of existing government services. Ensuring debt meets this requirement of sustainability will ensure that African states can afford the debt they take on.

Valuable

The principle of value is aimed at ensuring that the areas the debt funds have value to the nation. Value can come in two forms. First, value to people, improving the living conditions or opportunities of people. If it can be demonstrated that a policy, initiative, service or project that requires funding will demonstrably improve the lives of the public, it is not money wasted, as fundamentally development is about improving the living conditions and opportunities available to Africans. Secondly, value for money, which is simply, can the project, or initiative generate enough revenue to pay for the money being borrowed. These two forms of value do not limit the options for governments, rather they ensure that the money borrowed will go into something of importance. For instance, improved healthcare is key to improving the lives of millions around the continent and this requires that Africa train and deploy many more healthcare workers, as doctors, nurses, lab technicians etc., but this is an expensive undertaking. However, the training and deployment of a significant number of healthcare workers is not cheap. If the government can develop a program that trains and deploys healthcare workers in a way that benefits the majority of the population, borrowing to fund this can be justified. In terms of value for money this would be aimed primarily at infrastructure projects and guarantees to state owned enterprises, if it can be demonstrated that these projects (e.g. a new railway) or state corporation (e.g. an airline) can reliably pay for itself then borrowing to fund the investment can be justified.

Accountability

The principle of accountability is simple, the public finances must be public. Transparency in public financing creates accountability. Accountability in public debt transactions would require governments to open about what the borrowing is going to fund, the terms upon which the money is to be borrowed, how they plan to pay the debts back and tracking the use of the borrowed funds to ensure that unlike Mozambique’s gunboat tuna fleet, it goes where it is intended.

These three principles are interrelated. Debt that creates value is far more likely to be sustainable and being open and accountable about the terms on which the money is being borrowed allows for sustainability and value to be accurately and properly assessed. Having a developmental debt policy framework based on these three principles, would help ensure that Africa takes on debts that serve a developmental purpose. Furthermore, these principles can be developed into more detailed project and policy assessment frameworks, which policy makers, politicians, civil society and the wider public can use to access the government’s borrowing and hold it to account. Unlike the conditionalities imposed by the IMF or bond holders using these principles to guide African debt would be aimed at development not just paying back the money, they would give Africans agency over their own debt by requiring responsibility on the part of African policy makers. To end the cycle of African debt traps where development and vital services are sacrificed on the altar of fiscal responsibility, will  require Africa to adopt policies that better guide how the continent borrows and what it uses for.

[1] IMF, Regional Economic Outlook Sub-Saharan Africa: Fiscal Adjustment and Economic Diversification, October 2017 https://www.imf.org/~/media/Files/Publications/REO/AFR/2017/October/pdf/sreo1017.ashx?la=en

[2] http://guides.wsj.com/personal-finance/investing/what-is-a-bond/