26 January 2016

Africa: UN Economic Commission for Africa Warns Africa Over Foreign Loans

Photo: Economic Commission for Africa
Delegates at the opening session of the meeting of the Committee of Experts, African Development Week
press release

In a briefing in advance of the 26th AU summit later this week, the UN Economic Commission for Africa said on Tuesday (January 26) that Africa is facing increased debt repayments especially for countries that have borrowed in foreign markets.

Mr Adam Elhiraika, Director of the Macro Economic Policy Division at the ECA described the condition created by countries that invest in foreign bonds as "imported inflation" but noted that a country with strong macroeconomic fundamentals should be able to handle its debts. He underlined the importance of countries that o borrow abroad putting in place policies that would allow them to pay without compromising their macroeconomic climate.

Equally, the ECA believes that the continent is likely to enjoy greater growth in 2015, propelled by increasing public investment especially infrastructure and a buoyant services sector. Mr. Elhiraika also underlined the key role that the African Union and regional bodies' play in promoting political stability on the continent.

He noted that political instability continued to damage economies on the continent, adding that "political uncertainty and instabilities in South Sudan and Burundi and terrorist threats in Kenya and Somalia weigh on the region." In West Africa, the damage caused by Ebola was still evident in Guinea, Liberia and Sierra Leone, he said.

Over much of Africa inflationary pressure was reduced by lower global oil prices in 2015 and the continuing fall of food prices. In contrast, currency depreciations increased the risk of imported inflation but prudent monetary policy in countries such as South Africa and Kenya s had a moderating impact on inflation rates, he said. He noted that inflation was highest in 2015 in West Africa at 8.6%, up from 7.5%, the previous year.

Mr. Elhiraika said that drought in parts of Africa, particularly in Ethiopia could have adverse effects on the economy but the impact is expected to be less than in the early years because the economy is more resilient. Mr. Elhiraika identified one of the major factors impeding growth in Africa as weak employment growth. He said high unemployment posed challenges to poverty reduction, "decent" work and realization of the 2030 agenda for sustainable development.


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