Africa’s Development Debts

Public debt levels in sub-Saharan Africa rose sharply in the wake of the global financial crisis, and a number of countries are now classified by the World Bank and International Monetary Fund as at high risk of debt distress. By contrast with the debt crisis of the 1980s and 1990s, however, concerns were not region wide as recently as early 2020, and the policy environment for growth remains robust for the majority of countries in the region. The external environment nonetheless poses a set of region-wide risks that include the economic effects of the COVID-19 pandemic and are exacerbated by the increase in market-based debt and the retreat of the Paris Club among official creditors. Changes in perceived creditworthiness can now drive distress, and new challenges of creditor coordination will complicate the debt restructuring process. We motivate a research agenda that focuses on development assets at risk as rising debt service obligations crowd out development as well as operational and maintenance budgets. Preserving and enhancing these assets, which include advances in human capital and infrastructure and an improved investment environment, should be a central objective of domestic policy actions, preventative debt restructurings and institutional approaches to debt distress

Togo: Thorny transition and misguided aid at the roots of economic misery

The parliamentary elections of October 2007, the first free Togolese elections since decades, were meant to correct at least partially the rigged presidential elections of 2005. Western donors considered it as a litmus test of despotic African regimes’ propensity to change towards democratization and economic prosperity. They took Togo as model to test their approach of political conditionality of aid, which had been emphasised also as corner stone of the joint EU-Africa strategy. Empirical findings on the linkage between democratization and economic performance are challenged in this paper because of its basic data deficiencies. It is open to question, whether Togo’s expected economic consolidation and growth will be due to democratization of its institutions or to the improved external environment, notably the growing competition between global players for African natural resources

Liberalisation and Seigniorage Revenue in Kenya, Ghana and Tanzania.

This article examines the implications for seigniorage revenue of exchange rate and asset market liberalisation. It is argued that liberalisation lowers the average and marginal seigniorage capacity of governments by increasing the elasticity of substitution between base money and other financial assets. Moreover, to the extent that exchange rate liberalisation eliminates goods market rationing, it simultaneously reduces the return to holding precautionary and speculative money balances. The implication is that countries that have relied on seigniorage revenue need to undertake deeper-than-anticipated fiscal adjustment in order to maintain macroeconomic balance following liberalisation programmes. The article uses error-correction estimates of the demand for base money to derive the long-run revenue maximising rate of inflation for the three economies and to assess the revenue implications of the sluggish adjustment of money demand in response to short-term monetary shocks