Prime Minister Édouard Ngirente has dismissed growing concerns over Africa’s rising debt, saying that borrowing is not necessarily a bad thing and could foster growth.
The premier was yesterday officiating at the opening of the 42nd Ordinary meeting of the Association of African central banks in Kigali.
Debt is increasingly becoming a concern in Africa where public debt to Gross Domestic Product (GDP) increased to 45 per cent in 2017 from 29.1 per cent in 2013.
According to the World Bank’s Africa Pulse 2017 report, 11 out of 35 low-income countries in Sub-Saharan Africa (31.4 per cent of low-income countries) are classified as high risk of debt distress.
The prime minister, however, allayed fears saying that the act of borrowing itself is not inherently bad but called for ideal debt management.
In fact, debts can foster economic growth, and borrowing responsibly, maximising our returns on investments, and managing our debts is key to keeping the debt levels sustainable, he said.
Ngirente said it’s important for countries to come together to address common economic challenges in order to make the most of developments such as the African Continental Free Trade Agreement (AfCFTA).
"The African Continental Free Trade Agreement seeks to create a tariff-free continent that can grow local businesses, boost intra-African trade, promote industrialisation and create jobs,” he said. "This is one of the many solutions that can come from a united Africa collaborating to address the health of the economy of the region.”
Further, Ngirente noted, countries and regions have signed different treaties, developed cooperation models in order to trade with each other, as well as share knowledge, experiences and support each other in solving various economic challenges.
Ngirente said that policymakers and central banks ought to play a key role in developing solutions to new challenges to ensure that Africa continues its transformation journey in line with the Agenda 2063.
"Currently, with the modern financial ecosystem, we are dependent on central banks to safeguard our individual country’s monetary policy and financial systems. They also help to set standards and protocols that make it easier to have intercontinental transactions of goods and services,” he said.
Among other aspects where central banks can play a significant role include modernisation of payment systems and reduction of transaction costs in exchange of goods and services, cross border banking and easy exchange of currencies, and economic integration.
He said that despite challenges such as recurrent commodity price shocks, other external shocks and external imbalances in some cases, African central banks have contributed to ensuring macroeconomic stability.
The Governor of the National Bank of Rwanda, John Rwangonbwa, said that African central banks ought to work closely especially at a time when the global economy is facing major vulnerabilities that threaten to worsen these debt numbers across the world.
"Just last week the IMF announced that it had revised downwards the global GDP growth numbers for the years 2019 and 2020 because of the likely negative impacts of the trade wars between the US and China plus the uncertainties surrounding Brexit. It would not be farfetched to say that if we, Africans, don’t act together we will easily be the ‘grass’ at the mercy of the feet of the two global giants fighting each other,” Rwangombwa said.
editor@newtimesrwanda.com