Trends’ Study: There is a Fair Way Out of Sub-Saharan Africa's Debt Crisis

TRENDS Research and Advisory has released a study entitled "Sub-Saharan Africa's Indebtedness between Local Crisis and International Competition." The study included a comprehensive analysis of the debt crisis faced by Sub-Saharan Africa countries.

The study was conducted by the Economic Affairs Department at Trends Research and Advisory. It addressed the development of indebtedness in the region, its impact on economic growth, and how the Chinese economy was able to own most of the indebtedness in these sub-Saharan countries, and how the concerned countries cope with the debt crisis.

The study showed that there is an efficient and fair way out of sub-Saharan Africa’s debt. This approach includes a set of political measures, such as the review of the fiscal policy followed by sub-Saharan African countries, with clear debt targets and options ranging between debt sustainability and development goals.   The fiscal deficit should be reduced by 2% to 3% of GDP. Sub-Saharan countries need to mobilize more domestic revenues by removing some tax breaks or digitize registration and payment systems, strengthen budget institutions to improve the implementation of fiscal plans, engage community and educate individuals on fiscal policy reforms.

The study indicated the possibility of exploiting debt distress for the benefit of the countries of the region, by relying on innovative finance for development projects, such as the debt swap mechanism, and the issuance of green bonds.

Any loans borrowed by countries in the region should be long-term and at concessional interest rates. The concerned African countries should avoid relying on commercial debt to avoid other debt crises in the future.

The study is issued amid a deepening debt crisis facing sub-Saharan African countries, which may undermine development efforts in this region.