Economists under the International Development Economics Associates Limited (IDEAs), are asking creditors extending trillions of shillings to African countries including Kenya to refrain from dumping expensive loans without care of how the money is going to be used.
Calls for Africa to be wary of “yield-hungry” investors luring the continent into haphazard debts came up on the first day of the conference themed ‘The African Debt Crisis and International Financial Architecture’ that is ongoing in Accra, Ghana.
IDEAs, a “pluralist network of progressive economists” drawn from across the world, say the haphazard lending has fuelled the debt crisis on the continent, made worse by governance gaps witnessed in many countries in the region.
Adebayo Olukoshi, a research professor at the Wits School of Governance at the University of the Witwatersrand said in his keynote address that such investors were fueling a rise in loans either tapped outrightly for consumption or borrowed for development but diverted into recurrent spending, leaving citizens exposed.
“In cases of debt distress, preference has been how to save creditors. No matter its packaging and the conditionalities attached to it, it is clear that at the end of the tunnel, it is about maintaining the world order,” said Prof Olukoshi.
“China isn’t in Africa to play Father Christmas. China is in Africa for business. But it is taking policymakers long to notice. —If we didn’t learn our lessons from the West, then we are walking blind-folded,” he said.
Almost half of African countries are in debt distress or on the brink of debt distress and this has a big role on the public spending pressure, according to Yao Graham, the chairperson at IDEAs Africa Network who added that domestic debt is only serving to worsen the situation.
Peter Doyle, former senior economist at the International Monetary Fund said many creditors continue to issue such loans towards consumption, with no regard for the eventual debt distress of the recipients for as long the contracts are in their favour.
“A lot of resources have gone into consumption. Many of the creditors who issued these loans knew it was going to consumption. We have to look at what to do with creditors who, despite knowing that bad things will be done with the money, lend anyway,” said Doyle.
Jomo Kwame Sundaram, a Malaysian economist partnering with IDEAs said the international system continues to protect lenders, without any regard for the borrowers.
“Those borrowers) who are in debt distress are often left to die. Nobody wants to be associated with them,” said Prof Sundaram.
