Oral Test 2011
Africa's economies in the 1990s continue to face various difficulties. Growth prospects are greatly constrained by deteriorating terms of trade, inadequate flows, severe debt burdens, weak commodity prices, as well as an increasingly hostile international economic environment, according to Adedeji.
Debt is a major issue. "Africa is the most heavily indebted continent with regard to its level of income", he says. External debts amount to 85 per cent of Africa's Gross Domestic Product (GDP). An indicator of Africa's debt burden is its debt service-to-exports ratio: it was 40 per cent in 1998, compared to a ratio of 25 per cent for the world's most heavily indebted countries.
Debt payments contribute to Africa's resource outflow. "Africa is transferring more financial resources to the developed nations than it is receiving from them. In 1989, the net resource outflow amounted to $5.8 billion, a transfer due, in addition to debt service, to trade losses, capital flight and outflow to the International Monetary Fund and the World Bank. Debt service alone was higher than all the official development assistance Africa received from industrialized countries.
External favors greatly affect Africa's performance. The Economic Commission for Africa (ECA) estimates that in 1990, Africa's GDP will grow by some 3 per cent. But a more favorable international environment, better export performance, more favorable debt rescheduling and further debt reductions could lead to a growth of 4.5 per cent.
"Whatever happens", Adedeji says, "the World must move away from efforts directed at refinancing debt to a significant and substantial reduction in the stock of debt".
Adapted from The Economist, December 1989