BY JONI AKPEDERI
THE world is united in worrying over the debt mountain growing right before everyone’s eyes. The irony is that low-income developing countries, the victims in the last round of odious debt are again the ones labouring under the weight of dubious, ballooning, financial obligations resulting from the West’s policy and financial experts’ cockeyed, one-size-fits-all advice, which advanced countries, including Asian giants like China, wouldn’t deign to listen to.
International Monetary Fund’s assertion that the global debt burden retreated for a second year in a row is nothing but cold comfort since the level is now above the pre-pandemic level and set to get worse. Governments worldwide are spending heavily to respond to rising food and energy prices, and it is a no-brainer that low-income developing countries are most susceptible to more uncoordinated and ill-thought-out spending due to poor governance, chronic incidents of official corruption, and the smallness of the fiscal space they have to operate within.
Total global debt at about $235 trillion in 2022, i.e., 238% of global Gross Domestic Product, may be in retreat, as the Fund reckons. While LICs’ debt levels are considered lower than those of advanced and emerging economies, LICs are still more at risk of the quirks and challenges in the global economy.
Over half of LICs are already in deep trouble, exacerbated by Russia’s invasion and sustained war in Ukraine, as well as rising food and fuel inflation. Sub-Saharan Africa’s debt-to-GDP ratio is estimated to be above 60 percent. It is a little worse than the entire LICs’ 88 percent mark, with such countries as Argentina all but written off as a basket case. Nigeria, Africa’s putatively largest economy, has been reduced to a shadow of its once-proud self by a debt burden that has forced it to spend an incredible 90% of its revenues on debt servicing. Generally, the ratio of interest payments to revenues in sub-Saharan Africa is thought to be a depressing four times that of advanced countries’.
What is worse, rising incidents of socio-political upheavals and military coups in Africa are wreaking major havoc on economies already too weak to stand up on their own after suffering fiscal deficits incurred to ameliorate COVID pandemic-caused problems.
There’s no shortage of prescriptions for poor debt-challenged LICs. Experts from the Fund and Bank, as well as the myriad think-tanks and policy-research institutions that litter the global economic landscape, are forever advising debt-laden countries to mobilize more revenues to meet their development and obligation needs with more taxes. The snag here is that most LICs have citizens that are so impoverished that they can’t even feed themselves and companies that are barely able to keep their gates open for business due to rotten or non-existent infrastructure. So, where will the tax proceeds come from?
The most reasonable and meaningful solution to the debt and underdevelopment problem in the world has always been more equity and fairness in the way the peoples and countries of the world trade and conduct business amongst themselves.
Perhaps the most balanced take on the imbalance in the global economic system comes from Nigeria’s current leader and Chairman of the Economic Community of West African States (ECOWAS), President Bola Ahmed Tinubu, whose address at the 78th United Nations General Assembly still rings out like an eerie, conscience-searing message.
Said Tinubu: “The question is not whether Nigeria (and indeed Africa) is open for business; the question is how much of the world (advanced, rich countries) is truly open to doing business with Nigeria and Africa in an equal, mutually beneficial manner. Direct investment in critical industries, opening their ports to a wider range and larger quantity of African exports, and meaningful debt relief are important aspects of the cooperation we seek”.