Global Policy Forum

By Brian Ligomeka

Africa's growing debt burden is largely due to poor or corrupt political leadership and reckless economic management, the International Monetary Fund (IMF) said this week. IMF program coordinator for southern Africa, El Tigani Ibrahim, said increasing numbers of African countries were struggling to service debt repayments because their political leaders had mismanaged the economy. "Poor political leadership in many impoverished nations, coupled with poor public sector management and at times poor project selection by donors, has resulted in much of foreign borrowing being squandered," said Ibrahim.

Speaking at a Reuters Foundation economic briefing in Grahamstown, Ibrahim said African politicians often lived beyond their means, allowing high trade and budget deficits without encouraging savings to cushion their economies from external shocks. Ibrahim, who is also the IMF's resident representative for South Africa, added that all countries seeking assistance from international funding bodies such as the IMF had mismanaged their economies. "All countries struggling with debt burdens or seeking IMF support have failed to play their cards right in one way or another," he said. "Some poor countries resort to new borrowing simply to service their debts. Funds for new investment become scarce as a result, economic growth slows and debt dynamics are [derailed] and become unsustainable." Ibrahim also warned that even soundly managed economies were often disrupted by irresponsible political conduct by high level politicians who failed to understand that every word or action was monitored by international investors, creditors, donors and stock exchanges.

He called on African leaders to act more like statesmen and begin admitting and addressing inherent weaknesses or failings in their economies instead of "blustering" through crises. "Governments must realize that the price of a loss-in-confidence is always higher than that of admitting weaknesses and addressing the problems proactively," said Ibrahim. Ibrahim added that the IMF and World Bank heavily-indebted poor countries (HIPC) initiative was beginning to deliver dividends with 13 of 41 eligible countries having qualified for debt relief after successfully restructuring their economies and curtailing government spending.

Another seven African countries, amongst the poorest in the world, will qualify for HIPC funding by year-end. "HIPC was established in 1996 to benefit the world's poorest countries. Most of these are in Africa, which has a population pegged at 600 million people half of whom live on less than US$1 a day. Africa has debt nearing US$200 billion," he said. HIPC recipients have to guarantee that all funds freed from debt repayments are used exclusively for sustainable development, to ensure that no additional debt is incurred that that meaningful steps are taken to tackle poverty.

The IMF has also, Ibrahim said, established a linked Poverty Reduction and Growth Facility (PRGF) programmed to replace the unpopular Enhanced Structural Adjustment Facility. An estimated 80 low-income countries qualify for 10-year low-interest loans through the PGRF program, with an interest rate of only 0,5 percent. "Unlike ESAF, which had flaws that allowed funds to be diverted -- usually into pockets of politicians -- PRGF has been designed in such a way that it blocks politicians who [try to] siphon money under the carpet," said Ibrahim. "The PGRF with its overall strategy of growth and poverty reduction, will ensure broad participation and greater country ownership." He warned, however, that the IMF would thoroughly monitor beneficiaries to ensure good governance, accountability and transparency.

Ibrahim also warned the South Africa should urgently attempt to address the disparity between the country's privileged rich and massive poor underclass but cautioned President Thabo Mbeki against using international loans to do so. "South Africa's domestic financial reserves are large enough for the government to tap without risking external debt. It is however not the IMF's mandate to resolve income distribution among the citizens of its member states. This is a political issue and is therefore the responsibility of every country to resolve itself," he said.

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