Windhoek – “Any port in a storm,” is a credo sailors live by. And it appears to be one that governments in Southern Africa are starting to adopt as economies are buffeted by falling commodity prices, depressed productivity and job losses partly tied to the global COVID-19 pandemic.
A combination of huge debts and poorly performing economies have seen some countries trekking to the IMF, World Bank, Paris Club and China in search of relief.
And an economist has advised against incurring more ill-planned debt from the IMF and World, which has “never been a good option”.
First to opt for debt relief was Mozambique, whose request the IMF viewed favourably resulting in Maputo getting more room to better navigate the stormy waters of COVID-19.
Namibia’s debt is hovering around the 40 percent mark - above the Southern African regional threshold of 40 percent to GDP. Zimbabwe has long passed the 60 percent debt to GDP ratio, while Zambia is battling to service loans from China and multilateral financial institutions.
In its latest annual report, the Bank of Namibia said while Windhoek had already put the brakes on international borrowing, central government’s debt was now 56 percent of GDP. This is against a backdrop of a budget deficit of 12 percent, the highest since independence in 1990.
Tanzania, though experiencing phenomenal growth and recently classified as a middle-income economy by the World Bank, is also struggling with debt and failing to implement repayment plans.
Namibia economist Dr Omu Matundu-Kakujaha told The Southern Times Business that debt levels in the region were at a worrisome level, and advised governments to urgently explore which relief mechanisms they could take advantage of.
He said the high debt levels stemmed from borrowing for non-productive purposes.
“Debt from the Bretton Woods institutions has never been good. I think this is out of desperation that countries in SADC are resorting to borrowing from the International Monitory Fund.
“If the funds obtained will be used to fund well thought-out infrastructure projects that can stimulate the region's economy, it will be of some help.
“But if these will be used to prop- up the health services and for consumption it will weaken the region's economies: Very bad, with a small caveat, if used for development projects not so bad. “But if used for operational costs it will be a short-term solution only. In the medium to long-term it will hamstring economic growth with concomitant reduction of public services. A vicious circle of debt-poverty-debt will ensue,” Dr Kakujaha-Mantundu said.
He pointed out that the fact that countries were now seeking debt relief showed that they had incurred unnecessary debts in the first place.
“If borrowed funds causes sustained economic growth it necessarily should not lead to running to lenders asking for forgiveness.
“But should borrowing leads to the corrosion of public fiscal space it could be disastrous. It could reverse the small gains the region has achieved. Throwing the region into a debt trap and turning the region into beggars,” he said.