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10/17/2016

Is there a looming debt crisis in Africa?

Is there a looming debt crisis in Africa?
Workshop participants discuss issues of public debt management (Photo © CABRI).

 

by Peter Jonath

 

A senior economist at the African Development Bank was recently quoted in the Ugandan Daily Monitor Newspaper as dismissing fears of a possible debt crisis in Africa saying that most of the countries on the continent have sustainable debt levels compared to their Gross Domestic Product (GDP). However, this is not necessarily the sentiment shared by all, as several analysts have warned recently that African governments face an imminent debt crisis.  Proponents of this view frame their opinion on growing risk linked to the cost and increasing appetite for sovereign bonds by some African countries.  With falling commodity prices impacting on the revenue base of African resource rich countries there is mounting pressure on governments to use debt to fund their budgets.

 

Against this background, the Collective Africa Budget Reform Initiative (CABRI) was invited by the Ugandan Ministry of Finance’s Public Debt Office to deliver an in country workshop on public debt, risks and cash management capabilities.  CABRI is a peer-learning and exchange network that supports African budget officials and public financial management (PFM) practitioners. Together with Ugandan public debt officials and peers from Rwanda, Malawi and South Africa, CABRI with the support of GIZ’s Good Financial Governance in Africa programme, organised a meeting from 14 – 19 August 2016 in Kampala.  The focus of the workshop was on the effective management of national public debt stock and the funding of a country’s annual borrowing strategy.

 

During the four days of the Kampala workshop, participants from the Ugandan Ministry of Finance and peers from Malawi, Rwanda and South Africa covered the most critical aspects in public debt management, including strategies, capabilities and the appropriate institutional structures. Equally as important was the reaffirmation by the workshop participants on the role of contributions from the debt office throughout the budget process in managing risks and contingent liabilities. Public debt officials used the sessions to identify challenges and disruptions to the public debt office working environment.  Based on these challenges participants acknowledged what the main causes were and from these developed a number of action plans to take forward and implement.

 

At the conclusion of the workshop the public debt officials met with the Ugandan Ministry of Finance’s Permanent Secretary, who accepted the need to establish a central debt management institution with a front, middle and back office. The task of this institution is to do analysis on how the country should be borrowing and from which source.  The Ugandan Public Debt Office intends to implement these strategies as part of its commitment to strengthening its public debt capabilities.  CABRI and GIZ will continue to support Uganda with its public financial management reform agenda.

 

The Good Financial Governance in Africa programme is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Union (EU).  Please visit the GFG in Africa programme webpage for more information.  Contacts: Barbara Dutzler (barbara.dutzler@giz.de) or Peter Jonath (peter.jonath@giz.de).

 


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