Geneva, 23th – 25th November 2015
Sustainable Development Goals and the Challenges Ahead
by
Mr. Adam Elhiraika
Director, Macroeconomic Policy Division
UN Economic Commission for Africa
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
Debt Management in Africa
Adam Elhiraika
Director, Macroeconomic Policy Division
United Nations Economic Commission for Africa
2
Context
 The year 2015 - busy year for development practioners
 SDGs replacing MDGs- Sept. 2015
 FfD3 - July 2015 -AAAA
 CoP21 in Paris- Climate Summit Dec. 2015
 The implmentation of SDGs necessitate a large amount
of develpment finance
3
What does Agenda 2063 say about
debt & its sustainability?
 Agenda 2063 – Africa’s roadmap of
development
 Leaders committed to reduced unsustainable
levels of debts and to DRM(p.18)
 Africa benefitted from global debt reduction
initiatives (HIPC, MDRI…etc)
4
What is Africa’s growth and debt
outlook?
 Growth remains largely unchanged
 Medium term prospects remain good
 Weak global economy, monetary tightening,
weather related shocks and security concerns in
some countries remain a challenge
5
Africa’s growth remains on track despite
global economic slowdown
10
9.1
7.2
8
Real GDP Growth (%)
Mainly underpinned
by:
• Increasing domestic
demand
5.9
5.8
6.1
6.1
6
4
5.2
4.3
3.7
3.7
2.7
2
4.0
1.7
2010
2011
4.3
2.7
0.7
1.0
1.7
-0.6
0
-2
3.7
5.9
2.7
2.4
1.5
3.9
5.6
2012
2013
0.1
2014e
2015e
-0.7
Africa (excluding Libya)
Latin America and the Caribbean
Source: UN-DESA (2015)
East and South Asia
South-Eastern Europe
2016f
• Improving
macroeconomic
environment in a
number of countries
• Increasing public
expenditure
(infrastructure )
• Increasing investment
ties with emerging
economies
6
16.0
100
90
14.0
80
12.0
GDP Growth, China
70
10.0
Millions, USD
Chinese slowdown remains a risk to
Africa’s growth
• Despite China’s growth
decline, Africa’s exports
to China have remained
relatively high;
60
8.0
50
40
6.0
30
4.0
20
2.0
• The effect of China’s
slowdown may remain
small for Africa due to
the recovery in Europe.
10
0.0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total exports to China
Commodities exports to China
GDP growth, China
Sources: UNCTADstat (2015)
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Debt and SDGs
 Africa needs to grow at double digits with large
financing gaps to achieve SDG 1 by 2030
 It needs 70 Billion USD per year for climate
change adaptation & mitigation (SDGs 13)
 A responsible borrowing in the next 15 years &
beyond is required to achieve the agreed SDGs
8
Trends of Africa’s Total Debt
Source: AfDB data portal
250
200
150
100
50
0
1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Extenral Debt (% of GDP)
Total Extenral Debt (% of Exports)
Total Debt Service (% of Exports)
Multilateral debt (of total debt outstanding)
Africa’s net debt increased
• Net debt of Africa
increased from 5.8 per
cent to 9.9 per cent of
GDP between 2014 and
2015, relative to 1.6 per
cent in 2013.
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
2014
2015
2016
• But there is a
considerable fall in the
net debt of North
African and oil
exporting countries.
Sources: ECA calculations based on EIU (2015)
10
Debt Trends
 The key drivers of debt dynamics include:
high growth
low interest rates and debt relief
 Africa’s external debts improved significantly over the past
decades but net debt increased
 Total debt-to-GDP ratio dropped from 53.4
to 23.7 % in
2014

However, huge variations exist across countries
11
Sources of Debt

Compositions of debts is changing from external to
domestic, also from public to private



Multilateral loans- only 21% of total debt

South-South bilateral loans also emerging
Private lending constituted 49% of total external
outstanding debts
Sovereign bonds issued reached to $18bln in 2014 from
less than $1bln in 2008
12
Macroeconomic Determinants of
Debt Sustainability
1.Declining commodity prices reduce debt repayment
capacity & ability to borrow
 They also lead to weak fiscal sustainability
 However, fiscal sustainability can be enhanced with
sufficient DRM efforts
 For key commodity importers (e.g. Ethiopia, Rwanda
…etc), commodity price decline narrows the fiscal deficit
and can serve as an opportunity
13
Macroeconomic Determinants of Debt
Sustainability
2. Interest rate rises in developed countries lead to increases
interest payments & threaten repayment ability
 Interest rate increases can also reduce risk appetite of
investors
 For Africa, this might mean a decline in FDI inflows and
limited GDP growth
3. Increase in government expenditure unmatched by
government revenue
14
Macroeconomic Determinants of Debt
Sustainability
4. Exchange rate risks often follows rise in interest
rates
 Currency deprecation induced by monetary tightening
(e.g. rise in interest rate in the US)
 This, in turn, reduces debt sustainability potential
15
Strategies for better debt management
 Developing & maintaining strong institutions & sound
macro policies
 Prepare bankable projects with return investments with
debt servicing potential
 Reduce heavy reliance on commodity exports and
diversify the economic structures (e.g. via
industrialization)
16
Conclusions
 Africa continued to grow at a reasonable rate with a rate
above the global average
 There are increasing financial needs for its development
plans and visions
 Both internal and external macroeconomic factors
determine the outlook of Africa’s debt sustainability in
the short-term
 Medium to long-term debt sustainability outlook are
uncertain
17
THANK YOU!
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