A report released by the UN Conference on Trade and Development (Unctad) warns of a possible economic recession reminiscent of the ’80s and ’90s in Africa should governments fail to cut down on overspending and overborrowing.
According to the United Nations, traditional aid to Africa has so far not met the $600 billion to $1.2 trillion cost of sustainable development goals, a development which could expand the continent’s debt stock.
The UN study, which considers Africa’s external debt, reveals that even though the continent’s debt stock appears to be manageable, the continent will most likely to plunge in to an era of stark economic impoverishment:
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“While Africa’s…external debt ratios currently appear manageable, their rapid growth in several countries is a concern and requires action if a recurrence of the African debt crisis of the late-1980s and the 1990s is to be avoided.
Debt, both domestic and external, as well as other complementary sources, cannot be excluded from Africa’s list of development finance policy options.
However, Africa’s vulnerability to rapidly changing external conditions, including volatile commodity markets and unstable international financial markets, make debt a more problematic financing instrument than necessary,” excerpts of the report revealed.
At the opening of a Nairobi meeting on Sunday, UN Secretary General Ban Ki-moon argued that the slowdown in the global economy is a disturbing indicator of economic protectionism in Africa.
“There are worrying signs that people around the world are increasingly unhappy with the state of the global economy,” said Ki-moon. “The global trade slowdown and a lack of productive investment have sharpened the deep divides between those who have benefited from globalisation, and those who continue to feel left behind.
“And rather than working to change the economic model for the better, many actual and would-be leaders are instead embracing protectionism and even xenophobia.”
Unctad has thus spelled out specific economic steps by which all 17 sustainable development goals can be achieved. The top solution is the need to institute new sources of revenue, terminate the illicit financial flows of trade deals, and end institutionalised corruptions.
The warning by the UN follows Africa’s rise in external debt stock, which grew an average of 10.2 percent a year from 2011 to 2013, compared with 7.8 percent growth a year from 2006 to 2009.