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Boost African Economic Growth: ECA Urges Effective Debt Management

The Director for Macroeconomics and Governance Division at the Economic Commission for Africa (ECA), Adam Elhiraika, has called on African countries to institute efficient debt management strategies to prevent falling into the debt trap and to boost economic growth. Speaking at a peer learning workshop on debt management strategies for member states in Lusaka, Zambia, Mr. Elhiraika emphasized the challenge of debt management in African countries, where debt is a significant source of funding for economic growth and development.

The ECA hosted a capacity-building workshop for senior government officials to enhance countries’ fiscal prudence. Officials from Ethiopia, Sierra Leone, South Africa, Sudan, and Zambia shared information, experiences, and best practices on debt management strategies, policies, and operations to enable them to implement viable debt management procedures and strategies.

According to Mr. Elhiraika, the majority of the current public debt in Africa was accrued during the fiscal years of 2020 and 2021, when countries took on debt to deal with the effects of the Covid-19 pandemic. During an economic crisis, continued borrowing has led to high debt accumulation, which dwindles the government’s capacity to effectively manage public debt.

Delegates at the workshop discussed debt sustainability analysis procedures and medium-term management strategies, to enhance the capacity of public debt managers to evaluate the structure, dynamics, and risks of sovereign debt portfolios. Moreover, the workshop was expected to develop a roadmap that will support countries in better-applying debt management techniques and implementing requisite policies.

Consequently, Sierra Leone and Ethiopia were highlighted as examples of countries that have successfully implemented debt and risk management strategies. Joseph Thullah and Mohamed Samura from the Public Debt Division in the Ministry of Finance, Sierra Leone, said their country had implemented debt exchanges and debt buy-backs to manage and reduce government refinancing risks, prioritizing mobilization of grants over loans. Likewise, Ethiopia implemented a medium-term debt management strategy from 2016-2020, which helped assess the cost and risk of borrowings and ensured debt sustainability. Despite challenges, such as poor export performance and low FDI inflows, Ethiopia is eyeing opportunities to mobilize additional external resources exclusively from concessional sources and public-private partnerships.

In conclusion, Mr. Elhiraika stated that efficient and effective debt management would allow debtor countries to take action to avoid the legacy of ‘too little, too late’ sovereign debt management and restructuring. The ECA hopes that the workshop will help African countries institute effective debt management strategies, thereby boosting their economic growth and preventing them from falling into the debt trap.

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