Is sub-Saharan Africa facing another systemic sovereign debt crisis?
Coulibaly, Brahima S.; Gandhi, Dhruv; Senbet, Lemma W. | April 2019
Abstract
Concern is increasing about the prospect of a new sovereign debt crisis in countries across sub-Saharan Africa. The previous debt crisis of the 1990s is still fresh. It has only been 14 years since officials from major creditor countries (a group known as the Paris Club) and multilaterals adopted the ambitious Multilateral Debt Relief Initiative (MDRI) for outright forgiveness of debt owed by a group of 36 low-income poor countries. The majority of these countries, 29, in fact, were African. The massive debt relief was conditioned on sound economic management and poverty reduction strategies.
The MDRI was the logical advancement of a variety of initiatives for debt relief, the most prominent of which was the Heavily Indebted Poor Countries (HIPC) initiative instituted by the International Monetary Fund (IMF) and World Bank in 1996 to address debt overhang in the poorest countries of the world. African countries had been borrowing into the 1980s, which led to an increasing accumulation of debt that became unsustainable.
These debt relief initiatives, including MDRI, had good intentions and outcomes. Through unloading of the debt overhang, infusion of new loans, improved policies, along with enhanced investment incentives, the overall expectation was that there would be positive economic and social development outcomes. Indeed, for about a decade, most countries witnessed economic upturns and reduced debt burdens. The median public debt level (as a percent of GDP) for sub-Saharan Africa declined to about 31 percent in 2012, far below the levels leading up to the HIPC initiative. There were concerns associated with the debt relief program, notably the issue of moral hazard (Easterly, 2009). The worry was that, moving forward, this blanket debt forgiveness would distort incentives for weak governments to over-borrow and then over-invest, detracting from economic performance. These concerns are consistent with the belief that poor governance and fiscal indiscipline contributed to the debt overhang and that, unless there are genuine systemic reforms, history will repeat itself.
Citation
Coulibaly, Brahima S.; Gandhi, Dhruv; Senbet, Lemma W.. 2019. Is sub-Saharan Africa facing another systemic sovereign debt crisis?. © Brookings India. http://hdl.handle.net/11540/9975.Keywords
Regional Development Finance
Public Scrutiny of City Finances
Non-Bank Financial Institutions
Local Government Finance
Government Financial Institutions
Foreign and Domestic Financing
Financial Risk Management
Assessing Corporate Governance
Good Governance
Governance Approach
Urban Development Finance
Trade Finance
Small Business Finance
Rural Finance
Roundtable on International Trade and Finance
Regional Development Finance
Finance
Public Finance
Governance
National Budget
Budgetary Policy
Educational Budget
Public Financial Management
Financial System
Financial Statistics
Public Accounting
Business Financing
Subsidies
Social Equity
Economic Equity
Project Risks
Project Impact
Public Administration
Corporations
Taxation
Public Debt
Local Government
Debt Management
Corporate debt
Taxation
Public Accounting
National Budget
Municipal Bonds
Local Government
Local Taxes
International Monetary Relations
International Financial Market
International Banking
Central Banks
Business Financing
Financial Aspects
Taxation
Public Debt
Local Government
Debt Management
Pension Funds
Mutual Funds
Social Equity
Financial Aspects
Fiscal Policy
Small Business
Investment Requirements
Banks
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Tax administration and procedure
Tax policy
Effect of taxation on labor supply
Decentralization in government
Community power
Corporate divestment
Civil government
Delegation of powers
Equality
Neighborhood government
Subnational governments
Delivery of government services
Local taxation
Options
Government
Local government
Taxation
Grants
Loans
Use tax
Taxing power
State of taxation
Tax-sales
Tax revenue estimating
Tax planning
Spendings tax
Special assessments
Tax administration and procedure
Sales tax
Real property and taxation
Progressive taxation
Effect of taxation on land use
Effect of taxation on labor supply
Intergovernmental tax relations
Local taxation
Options
Government
Local government
Taxation
Employee pension trusts
Investment management
Investments
Multiemployer pension plans
Keogh plans
Individual retirement accounts
Pension plans
Employee pension trusts
Pension trusts
Accounts
Savings
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