TITLE:
Explaining Africa’s Debt: The Journey So Far and the Arithmetic of the Policymaker
AUTHORS:
Joseph Atta-Mensah, Muazu Ibrahim
KEYWORDS:
Debts, Distress, Africa, Interest Rate, Sustainability
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.2,
April
29,
2020
ABSTRACT: This paper provides a trajectory of Africa’s debt
levels over the past decades. We observe that, the continent’s debt-to-GDP is
rising and approaching levels that could potentially cause distress and reverse
economic gains registered over the period. While Africa’s growth prospects are
promising, the real interest rates could be rising in the future due to slowing
growth in emerging markets and tighter global financial conditions. With the
interest rate–growth differential as the main drivers of overall debt dynamics,
we argue that, African countries should aim at high real growth rates as a key
element of their debt sustainability strategy. Overall, this paper recommends
that policymakers could reduce the debt-to-GDP ratio by accelerating growth and
improving primary balances.