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Ghana, Gambia in debt distress – David Ugolor
...Warns other countries especially Nigeria
By Ben Ogbemudia
The Executive Director of Africa Network for Environment and Economic Justice, Rev. David Ugolor on Thursday said Of the fifteen-member states of the Economic Community of West African States (ECOWAS), five are already faced with heavy debt burdens.
Speaking at West Africa Region Debt Advocacy and training seasons at Barcelona hotel, Abuja, Ugolor said Gambia and Ghana are already in debt distress, while Guinea-Bissau and Sierra Leone are in high risk of debt distress.
The human rights activist said the public debt burden in West Africa has risen steadily in recent years, While IMF debt sustainability analysis as of February 2021shows that the majority of countries in West Africa have remained in moderate debt distress, further analysis indicates that debt accumulation prior to the outbreak of Covid-19 outpaces the ability of growth performance to support debt servicing.
“We recall that close to half of the countries in West Africa received debt relief under the Heavily Indebted Poor Countries initiative (HIPC) and the Multilateral Debt Relief Initiative (MDRI) debt restructuring programs but are today still faced with high fiscal deficits, significant debt servicing costs and an ongoing global pandemic that could further stall growth processes, worsen their fiscal position, increase debt vulnerabilities, create more poverty and widen inequality gaps.
“The concomitant economic slowdown and commodity crunch that has come with the outbreak of the COVID-19 pandemic is a clear indication that central and regional government borrowing in West African countries is likely to be in an upward trend.
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” This will occur due to a surge in public financing needed to mitigate the unexpected shocks caused by COVID-19.
” The quasi-fiscal operations of state-owned enterprises and engagements together with the multiplicity of development financing instruments – including public-private partnerships and blended finance instruments – which come with associated contingent liabilities will pull up West Africa debt figures.
While warning of more possible problems ahead, Ugolor said the conflicts in Nigeria, Niger, Mali, Burkina Faso, Chad, Senegal, and several other countries in the region will further complicate the debt burdens.
“In the Lake Chad region alone, over 100,000 persons have been killed by insurgents while 17million people have been displaced.
” This has further pushed nations to go borrowing to prosecute endless wars orchestrated by violent extreme groups in the region.
” The sum effect of the above scenarios will be a significant degeneration of debt vulnerabilities in the ECOWAS.
“This is going to double down on the often-poor investment choices made with borrowed funds which often do not generate substantial revenue to boost the debt-service potential of countries.
” Further downsides include the weak domestic resource mobilization potential for many countries in West African countries
On his part, Minister of Finance, Budget and National Planning, Hajia Zainab Ahmed, and Minister of State, Finance, Budget and National Planning, Prince Clem Agba said Nigeria under the leadership of President Muhammadu Buhari recognizes and appreciate the importance and value of foreign loan and aids.
Agba who was represented by Dr. Philip Ugbodaga said Nigeria seeks external loans only for very high priority, self-liquidation, and well-appraised projects, Such projects have a direct and quick impact on economic growth explaining the reasons for external borrowing that excludes social or political reasons.
” The overall idea is for the government to increase export earnings to promote the industrial sector and concomitantly decrease import dependency. I have always maintained that there is absolutely no harm in borrowing as far as the borrowed funds are used for productive purposes as external debts remain one of the significant sources of financing capital projects.
“We will like to point out that this meeting and training is a veritable opportunity for brainstorming on mobilizing a common debt advocacy position in the West African sub-Region. I have no doubt that the Sessions will be intellectually stimulating and enriching.
“The recent outbreak of the COVID-19 Pandemic has again brought to fore, the issue of Debt and Aid Effectiveness. The pandemic was double-pronged – health and economic. Governments all over the world were faced with the difficult decision of bringing economic activities to a ground halt to curb the spread of the virus with a significant negative impact on the economy and welfare of the people. The pandemic also resulted in low prices of products and low government revenues.
“To “build back better’ after Covid-19, there is greater urgency for debt relief and Aid Effectiveness from international finance institutions, other country lenders (China, USA, etc) for debt relief in order to mitigate the severe economic, social, and health implications of the pandemic as Africa’s vulnerable economies have particularly suffered under lockdowns, border closures, export restrictions, and commodity price decreases.
” The support should include debt cancellation for relevant West African countries and interest-free government loans. Secondly, extend the deadlines for debt repayment through debt service suspensions specifically for the West African countries most impacted by COVID-19, and encourage international lenders to take similar actions to support the sub-continent financially.”
