A third of African countries have unsustainable debt positions and the continent must reduce its reliance on foreign funding for projects that don’t help them service loans, Zimbabwean Finance Minister Mthuli Ncube said.
Global investors in search of higher yields have been “gobbling” up African debt over the past decade, he said.
Governments on the continent used the financing to build infrastructure and fund recurrent expenditure, neither of which create enough foreign earnings that can be used to repay creditors, said Ncube, a Cambridge-trained former chief economist of the African Development Bank.
African countries “must stop borrowing to finance infrastructure,” he said at the World Economic Forum in Davos on Wednesday. “You don’t export roads. The bulk of the financing must come from domestic sources or public-private partnerships of Build-Operate-Transfer” models, Ncube said.
Some countries appear to be entering “debt-restructuring mode,” Ncube said, without identifying them.
“I hope that we’re not at the tipping point of another round of Highly Indebted Poor Countries initiatives to extinguish African debt, but it’s beginning to feel like that,” he said.