The chairman of the East African Community Monetary Affairs Committee and the governor of the South Sudan Central Bank, Dr. James Alic Garang, told BurundiTimes in Washington, DC, that partner states need a harmonized approach to secure preferential treatment.
“The issue of debt that I mentioned earlier cannot be addressed by one country alone. If we act as a bloc, we can achieve the preferential treatments that come with such an approach; that would be one way forward,” said Dr. Garang.
These comments come at a time when the International Monetary Fund (IMF) has warned countries to take decisive action to control rapidly growing public debt. According to the IMF, public debt is projected to exceed $100 trillion, with many countries, including those in Africa, at high risk of debt distress.
“Deficits are high, and global public debt is extremely elevated, rising, and risky. The global public debt is projected to surpass $100 trillion this year. At the current pace, the global debt-to-GDP ratio will approach 100 percent by the end of the decade, exceeding the pandemic peak,” said Vitor Gaspar, the Director of the Fiscal Affairs Department at the IMF, during an IMF annual meeting in Washington, DC, last week.
In Africa, particularly in emerging markets and developing economies, the IMF indicated that countries should put more effort into rationalizing larger government wage bills and safeguarding public investments to limit negative impacts on output. Currently, African countries are facing significant debt burdens, with over 30 nations on the continent either showing signs of being in debt distress or at risk of slipping into it.
According to the IMF, Burundi’s government debt remains the highest in East Africa at 86 percent of the country’s GDP, followed by the Democratic Republic of the Congo (11 percent), Kenya (69 percent), Rwanda (71 percent), South Sudan (56 percent), Tanzania (47 percent), and Uganda (51 percent).
The East African Community Monetary Affairs Committee, which comprises the Central Bank governors of the eight EAC member states, indicated that policymakers face three main challenges, including regional growth projected at 3.6 percent in 2024, which is generally subdued and uneven, although a modest recovery to 4.2 percent is expected next year.
“Financing conditions remain tight, and the complex interplay of poverty, limited opportunities, and weak governance, compounded by a higher cost of living and short-term hardships related to macroeconomic adjustments, is fueling social frustration,” said South Sudan Central Bank Governor Dr. James Alic Garang.
The African Forum and Network on Debt and Development (AFRODAD), a pan-African civil society organization based in Zimbabwe, noted that borrowing costs for African countries are high due to elevated interest rates. African countries pay about 10 percent in interest rates on average, compared to approximately 0.8 to 0.25 percent for countries in Europe, including Germany.
In Africa, countries are now carrying a higher level of debt than before the COVID-19 pandemic, when it was at 61 percent. According to the World Bank, the structure of African debt has changed considerably; bilateral debt now represents 27 percent compared to 52 percent in 2000, while commercial debt accounts for 43 percent of the total debt, up from 20 percent in 2000.