It has been more than seven years since the onset of the global financial crisis. Lest it be forgotten, it was the worst financial crisis since the Great Depression of the 1930s. And it threatened to bring down the global economic system. 

For those who are complacent that the global financial crisis had been in some way ‘fixed’, apparently it hasn’t. A new report, the 16th Geneva Report on the World Economy, reveals some stark facts that have been largely ignored by policymakers.

Contrary to widely held beliefs, the world has not yet begun to de-leverage its debt exposure. In fact, global debt to GDP is still growing, breaking new highs. The total burden of world debt, both private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent in 2009, and 215 per cent in 2013.

In the same week as the release of the Geneva report, the International Monetary Fund lowered its forecast for global growth, on the back of weak global performance in the first half of 2014. There are particular concerns over growth in the euro area.

The inexorable rise of debt, combined with the slow pace of global growth, is a potential recipe for disaster: it is precisely what causes a lack of confidence in the financial system and in the capacity of countries to pay off their debts.

Such trends should make policymakers everywhere pause and reflect. Arguably the West’s financial services sector remains a problem. Reforms to the sector since the crisis broke have been little more than token and it continues many of its bad practices that lead to the crisis in the first place. Banks are still making exorbitant profits and paying out excessive salaries to its kingpins.

Moreover, the underlying detonator of the global financial crisis – the proliferation of opaque financial instruments – has not been tackled at all. Under Basel III regulations, banks are required to improve their capital requirement ratios – something they dislike, but ultimately it has little impact on high-risk speculative practices.

There is a crucial political dimension to these problems too. Right-of-centre parties worldwide have conflated high debt with reckless public spending, particularly on welfare. In reality, it was the financial crisis itself, caused by systemic failures within banks, that caused debt to explode in the first place.

We are now living with a combination of constrained public spending, low growth, and still excessive risk-taking by the financial sector - all the ingredients for further economic turmoil.

And the relevance of all this the East African region? As documented in a report issued by a group of prestigious developmental economists , the real objective of policymakers should be to transform the financial sector from a bad master to a good servant of the global economic system. In principle the financial sector should have two main functions.

First, it should serve the needs of the real economy in terms of efficiently providing funds for investment. Second, it should help manage and mitigate risk. Over the last two decades in the West it has done neither.

As a direct result, the global economy is locked in a pattern where financial crises threaten to become more and more frequent as the financial sector becomes further detached from its economic function and increasingly tied up with high-risk speculation.

There are a number of important repercussions specifically for the East Africa region. Firstly, it appears that the economic malaise evident in the Western economies is not likely to dissipate any time soon.

UNCTAD, the UN trade body, is currently predicting that import growth into Western Europe and the United States is likely to remain sluggish at best for up to 10 years.

Eastern African countries generally have strong trading relationships with these high-income countries, and some countries have strategies to diversify their exports pinning hopes on precisely those western markets.

Given the prevailing circumstances, however, it would seem wise not to expect too much in terms of dynamic export growth to these high income countries over the short to medium term.

Given the fact that emerging market growth is also weakening, and that there are concerns now about the level of debt and sustainability of growth within the Chinese economy, it seems now more imperative than ever to prime both national markets and intraregional trade within Africa. Put simply, African development in the future should hinge less on external markets, and increasingly leverage vibrant domestic and regional markets.

A second implication for Eastern Africa is the importance of learning from the negative experience of Western countries and address some of the key challenges within the financial sector in Africa. Much of the debate in Africa around financial sector development hinges on ‘financial inclusion’, but in reality the problems are more deep-seated.

At present the banking sector is failing to provide the necessary finance for the development of the private sector - interest rate spreads are extremely high, loans are difficult to access, and not enough credit is being provided to priority sectors. In Kenya, for instance, around two thirds of banking sector profits come through the trading of government securities. As a consequence, lending activities are relatively neglected.

This needs to change, by judicious use of the regulatory framework and the introduction of greater genuine competition in the sector, among other measures. Put bluntly, if we wish to accelerate economic growth and development, policymakers in Africa should avoid giving the banking sector the same ‘soft ride’ that they have been given in Western countries.

The writer is the Chief of Data Centre and Senior Economic Affairs Officer of the Sub-regional Office for Eastern Africa (SRO-EA) of the United Nations Economic Commission for Africa (ECA)