Harare — Some few weeks ago, The Financial Gazette reported that the country's external debt is projected to rise to US$7,6 billion by the end of the year based on the statistics released by the IMF.

In Abuja, on June 7 2010, News Agency of Nigeria (NAN) quoted the Nigerian Finance minister Olusegun Aganga as saying that, as at March 2010, the foreign debt of Africa's most populous nation stood at US$4,3 billion.

Across the eastern part of Africa, a February 26 2010 report in the Ugandan Monitor newspaper revealed that although the country was among the first to benefit from debt cancellation, its external debt continued to rise against a background of spending the loans on military equipment and corrupt tendencies within government.

These are just a few cases which seem to reinforce the fact that Africa is highly indebted as it stands.

A huge debt will have an adverse impact upon the future generations in view of the fact that taxes will have to be raised in the future to pay it up. If the present generation is worried about the welfare of the future generations, they would then be forced to forgo current consumption in order to accumulate enough bequests for them unless they can expand their supply potential in order to broaden the tax base now.

Moreso, debt stifles economic development and negatively affects a country's sovereign credit rating.

Although economists, politicians and other vested interests alike are not willing to eat from the same plate of opinion as regards to how best Africa can come out of this quagmire, some sections of the African community seem to acknowledge the fact that the best option that most African States can embrace is to seek Highly Indebted Poor Country (HIPC) status so that their ever-increasing external debt burden could be cancelled. The HIPC initiative became fully operational in 1996 and was later enhanced in 1999. But the key question is how effective is this option?

To start with, a number of African countries have adopted the HIPC initiative in the past. These include Benin, Zambia, Mozambique, Tanzania, and Uganda. This came about after satisfying the international financial institutions that their debts were unsustainable. As of December 2006 HIPC success stories had already been noted in Tanzania and Mozambique with over US$35 billionworth of debt forgiven for 30 countries. The money saved under the HIPC framework would then be used to provide health care, education and infrastructural development by the beneficiary country.

Should a country qualify for HIPC status, it would be required to adopt compulsory economic prescriptions which, skeptics argue, have been proved from past experiences to do more harm than good to a country.

The disastrous effects of lender-led Economic Structural Adjustment Programmes in Africa are often cited as examples.

To restore goodwill in the short term, a country will have to meet its arrears; this is costly given the fact that such monies would go a long way in satisfying the needs of a country's citizens if channelled towards the provision of social services in the meantime

Quite a number of civic organisations across the continent and beyond don't seem to be in favour of this route.

They draw attention to African cases whose debt situations worsened after embracing the HIPC initiative. For instance, Zambia was to be later haunted by litigation from vulture funds (institutions which are in the business of buying debt at big discounts with the hidden motive of suing the debtor country in later years in order to recover at least the original value of the debt) which later sued the copper-rich nation with the intention of getting more than the original value of the debt.

As of January this year, countries such as Angola, DRC, Cameroon, Tanzania to mention but a few were widely believed to be targeted by those vulture funds. While creditors such as The Paris Club seem to sympathise with Africa in the wake of this challenge, little has been done to safeguard the interests of HIPCs or potentials and thus, Africa need to be wary of vulture funds if they choose to go the HIPC route. In as much as the ballooning of Africa's debt could be attributed to poor debt management, a closer look at the debt profile of most African States reflects the fact that part of the external debts qualifies to be odious debts on the basis that they were acquired to support repressive political dispensations rather than to benefit the entirety of the local populace. In Zimbabwe debt acquired during the colonial era falls in this category so is debt accumulated by the apartheid regime in South Africa.

It would thus sound fair to lobby for cancellation of such debts by reason of the fact that this is tantamount to compelling African citizens to pay for the colonial injustices of the past meted out against them. Back in 1979 in the case of Zaire/Congo, debt experts pointed a finger at irresponsible lending as a cause of odious debt. In addition to that, some of the debts arose from failed structural adjustment programmes of the 80s and early 90s which were recommended by the lenders themselves. Faced with situations where any given country's debt is at least two times greater than the total value of their exports, there is need for the continent to expand its production.

Most African countries are highly endowed in minerals some of which are not exploited to capacity due to technical constraints. Thus African need to use her abundant supply of natural resources to come out of the debt trap. It is ironical that Africa has arguably the richest stock of natural resources, yet is among the poorest continents on the planet.

Such opportunities could, however, remain pipe dreams given the fact that there has been volatility in the world prices of commodities which constitute Africa's main source of exports such as oil, platinum, coffee. World trade laws are also skewed in favour of industrialised nations and there is need to get rid of subsidies which distort prices of agricultural products on the world market. Rescheduling of debt through formal deferment could be another avenue.

Debt-forgiveness (whereby the creditor excuses repayment of debt) could be very helpful to Africa.

However, there is a moral hazard associated with this since the country whose debt has been forgiven might have the incentive to over-borrow until their debts have reached unsustainable levels in the hope of being forgiven again. Thus a more feasible way could be a negotiation for a moratorium on debt service and no accumulation of arrears.

A more radical way of alleviating a country's debt could be through repudiation of odious debt. This method, however, has more problems than benefits since it closes every available opportunity for loans in the future with a very disastrous effect on a country's creditworthiness. There is a general consensus among Africans that arrangement for cancellation of their debts by their different creditors particularly the IMF, the African Development Bank and the World Bank is the only way that they can achieve sustainable development and economic growth.

I wish to congratulate South Africa and the rest of the majestic continent of Africa on the occasion of their hosting of a very successful World Cup 2010. Waka waka! This is Africa!

Exeviour Tarisayi Shumba is a taxman and an economic practitioner