The IMF warned African countries that their increasing indebtedness and failure to service their public debts was creating poverty for its citizens.
Johannesburg – The International Monetary Fund (IMF) on Wednesday warned African countries that their increasing indebtedness and failure to service their public debts was creating poverty for its citizens.
Montfort Mlachila, senior resident representative for IMF in South Africa, said that countries like Zimbabwe, Eritrea, and Mozambique were facing worrying levels of debt and as the IMF they were concerned about the situation in these countries.
“One of the key challenges African countries face is the rapid increase in public debt levels, which in turn mean that they are spending more and more money on servicing the debt at the expense of more socially and economically useful activities such as investment in infrastructure,” Mlachila said.
“So to address this challenge there is a need for countries to create the necessary fiscus space notably by increasing the domestic resource mobilisation, in other words, broadening their tax base so that they can capture a lot more revenues that are needed to address this challenge.
“Also, governments need to invest in better managing their own investments because a significant proportion of money is wasted through all kinds of inefficiencies due to bad management.”
Mlachila was speaking on the sidelines of the last day of the Infrastructure Africa Business Investment Forum in Sandton. He said that if African countries did not find “creative ways” of managing their debt, this could result in poverty levels being prolonged longer than necessary.
“There are quite a few countries facing high levels of debt, they are either in debt distress or they are already having serious problems of managing their debt. Zimbabwe is an obvious example, and Eritrea where the debt is distress and they are spending more money on day-to-day management of the country on recurrent expenditure rather than spending money on investment,” Mlachila said.
“Mozambique right now is facing problems because a lot of the debt has become unsustainable and they will need to restructure the debt so that they can create the fiscal space to invest more in infrastructure.”
Zimbabwe has once again plunged into its worst economic crisis in a decade with fuel running out of petrol stations, prices spiralling out of control and major retailers closing shop due to the cash crunch in the country.
Mozambique is facing an economic woe of its on as public hospitals have no medicines and the situation getting more and more serious as a result of the U.S.$2 billion secret loans from Credit Suisse and Russian lender VTB for the purchase of naval equipment and a fishing fleet that were backed by Mozambique’s financial minister without parliamentary approval.