A US research think thank has accused the World Bank and International Monetary Fund (IMF) of sitting pretty as African nations sink themselves into debts.
Brookings Institute said the two Washington-based institutions were instead waiting for a moment when one of the five major Sub-Saharan Africa economies, including Kenya, would sink into debt distress before acting.
In a blog, Future Development, the US think-tank said they would soon release a report showing that despite public debt in sub-Saharan countries rising faster since 2008, the two multilateral organisations have not reacted accordingly. Since 2017, said Brookings, the debt to gross domestic product ratio in most Sub-Saharan Africa’s countries breached the 50 per cent mark.
However, these multilateral organizations, instead of digging strongly, “gently” warned economies such as Ethiopia, Cameroon, Ghana, Kenya, Mauritania, and Zambia of the need to rein in public spending.
“But we believe that until one of Africa’s big five economies — Nigeria, South Africa, Angola, Ethiopia, and Kenya — becomes debt distressed, the alarm bells won’t be truly rung,” said Brookings Institute. Kenya’s public debt has already hit alarming levels.
The Central Bank Governor Dr Patrick Njoroge is the latest to urge the country to check on further uptake of debt.
“There is less headroom for external borrowing and we need to move into non-debt financing arrangement like the Sh230 billion road from Nairobi to Mombasa. We should move from the old song of borrow and invest,” said Dr Njoroge recently.
Kenya’s debt stands at Sh4.6 trillion, up from Sh2.1 trillion five years ago. The IMF has in recent times come out strongly against Kenya’s huge appetite for debt, warning that further uptake would reach some dangerous levels.
The Brookings article found that for most countries in Africa the cost of borrowing exceeded the rate of growth, meaning servicing debt is going to be difficult for these countries. African economies are advised to increase their own revenues by expanding the tax base.