Africa Environment Outlook

DEBT BURDEN

The persistent dependence on external financing by African countries has made it difficult for them to remain on the sustainable development track. However, many other factors have also contributed to economic stagnation; these include governance, civil strife and disasters. Regional engagement by multilateral financial institutions such as the WB and the IMF comes at a price for recipient countries. Sub-Saharan Africa's total external debt rose from US$176 874 million in 1990 to US$216 359 million in 1999 (World Bank 2001b). Some 48 of the 52 African countries spend about US$13.5 000 million every year repaying debts to rich foreign creditors. The region's massive foreign debt burden has been described as 'a new form of slavery, as vicious as the slave trade' (Colgan 2001). African countries have been receiving financial assistance from the developed countries in order to balance their development budgets in the midst of growing financial difficulties due to poor commodity prices, globalization and other factors (UNDP/UNEP/WB/WRI 2000). For example, sub-Saharan countries exported goods and services worth about US$96 584 million in 1999, while total external debt amounted to US$216 359 million in the same year (World Bank 2001b).

Saddled with heavy debt commitments, many African countries are unable to build and maintain economic reserves. The overall result is: further erosion of regional coping capacities; greater vulnerability to both internal and external stresses and shocks; indebtedness; increasing reliance on foreign aid; and reduced competitiveness in the face of economic globalization. Africa's heavy international debt burden contributes substantially to human vulnerability and security in the region. The servicing of debt consumes resources which could be spent on development, poverty alleviation and increasing coping capacities. Allied with the question of debt is that of SAPs, which often include obligations to reduce state spending, especially on social development and environmental management-a situation which tends to exacerbate the vulnerability of the poor and other marginal groups to environmental, economic and social stresses. Heavily Indebted Poor Countries (HIPCs) in Africa are also increasingly resorting to unsustainable exploitation of the region's natural resource base in order to boost foreign exchange earnings to service debt.

Table 3.5 gives summary data on the situation described in the Box 3.13.

Box 3. 13 Africa's indebtedness

Africa's official debt at the end of 1999 stood at approximately US$170 000 million (WB 2000c). In sub- Saharan Africa, debt service consumes between onequarter and one-third of foreign exchange earnings, diverting resources from productive investments (FOE 2001, Oxfam International 1997). Africa paid back US$1.31 in debt service for every US$1 received in aid grants in 1996 (Jubilee 2000).

Large debt service payments mean that vital social services must be sacrificed to meet debt payments, which makes the poor in HIPCs even worse off and, by implication, more vulnerable (FOE 2001). For example, the United Nations Children's Fund (UNICEF)-which supports calls for the cancellation of debt owed by African countries-says that forest loss in HIPCs was 50 per cent greater than in non-HIPC countries between 1990 and 1995. Sub-Saharan Africa is forced to spend more on servicing its external debts than on the health and education of the region's 306 million children-while child mortality averages one-third more than other regions of the world (IPS 1999). In addition, heavy debt burdens result in increased pressure on the environment because of the growing need by HIPCs to generate foreign exchange to meet debt obligations.

Table 3.5 Africa-total external debt

Sub-region	Annual average (US$ millions-current prices)
Sub-region	1975-84	1985-89	1999-MR

Northern Africa	48 632	102 600	109 804

Western Africa	22 766	58 308	76 661

Central Africa	9 254	19 745	31 854

Eastern Africa	6 042	16 636	25 046

Southern Africa	11 084	26 133	63 237

IOC	1 721	4 350	6 074


Total Africa	97 717	228 409	302 655

SSA	54 892	136 754	209 816

SSA Excl. S.A.	54 892	136 751	195025

SSA Excl. S.A. & Nigeria	46 377	110 830	163 455

Source: Compiled from WB 2001

Sub-Saharan African economic and financial problems were made much worse in the 1970s and the 1980s by a combination of:

an investment in growth and development which failed to earn the expected rewards;
the international debt crisis, increases in oil prices and rising interest rates, plus the inadequacy of aid programmes which were meant to provide relief;
repeated drought, crop failure and widespread famine;
the failure of agricultural production to contribute significantly to growth, and the increased dependence on imported food;
widespread warfare and civil unrest;
the fact that SAPs have so far only been partially successful, and the success recorded has been mainly in terms of systems rather than people, who would have hoped to have their livelihood problems solved through the SAPs;
reduced competitive ability;
loss of intellectual property rights; and
economic policy failures.