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    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
    |Taxing power
    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
    Inheritance and transfer tax
    Trusts and trustees
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    Citable URI
    http://hdl.handle.net/11540/9975
    Metadata
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    africa_sovereign_debt_sustainability.pdf (445.5Kb)
    Author
    Coulibaly, Brahima S.
    Gandhi, Dhruv
    Senbet, Lemma W.
    Theme
    Finance
    Governance
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise