Friday, September 13, 2013
Are poor African countries net creditors to rich western countries?
As Africans, we have been made to believe that African states are propped up by loans and foreign money from the west. That right from free HIV treatment to World Bank loans,to government budget support, western credit and philanthropy sustains Africa's 'failed' states. A bold recent book however challenges this widely-held perception by providing stunning economic evidence that African countries are actually net creditors to the rich industrialized world. Put in lay man terms, the book's central argument is that more money leaves Africa to the west than comes into Africa from the west. The book (recommended to me by Pelegrine Sebulime) is entitled 'Africa's odious debts: How foreign loans and capital flight bled a continent'' was authored by Ndikumana and Boyce, Economics professors at the University of Massachusetts at Amherst, the former is actually Burundian. The book is no idle polemic but provides hard economic data most of which has already been published in academic journals since 2001. One of the articles written on this precise argument won an Economics award. Leonce Ndikumana should know. He holds a doctorate in Economics from University of Washington at St Louis and was head of research at African Development Bank from 2008 to 2011.He was also Chief of Macroeconomic analysis at the United Nations Economic Commission for Africa from 2006 to 2008. In an article the authors published in the Journal of Development studies in 2001 titled’ Is Africa a net creditor?', the authors write ''We found that capital flight from 25 low-income African countries over the 1970-96 period amounted to $ 193 billion(and to $ 285 million including imputed interest earnings) comparing to this to the $178 billion in external debt to the same set of countries, we concluded that Africa is a net creditor to the rest of the world: the external assets of these countries exceeded their external debts'. Here is how Ngozi Okonjo-Iweala Nigeria's Finance Minister put it 2005 ''We make annual debt repayments of more than$1.7 billion,three times our education budget and nine times our health budget'' Compounding the outrage is the empirical fact that most of loans borrowed by African countries end up in private pockets while the loans of course, remain publically-held by African states-for generations. The book discusses compelling case studies of Mobutu Sseseko's Zaire and Fernando Marcos' Phillipines. In a memorable story from the Philippines, 2 billion US dollars was borrowed from US Export-Import Bank and a Citibank and American Express consortium to build a nuclear energy plant that never produced even an ounce of electricity yet Philippines went on to pay billions of dollars in loan repayments. The trouble, partly, was that the nuclear plant was built on a site prone to earth quakes! The book highlights the complex behind-the-scene dealings at multilateral lenders such as the IMF which was arm-twisted by the US government to lend to Mobutu's Zaire contrary to its' own assessment. Not altogether strange if you have read similar tales in the frame of'Confessions of an economic hit man'. The notion that the west has taken more out of Africa than the other way round is hardly original. It has been previously harped by economic historians and anti-colonialism African intellectuals. This book, however, is hard empirical proof of this contemporary African reality of a hemorrhaging continent. One mortgaged by its elites in lots of needless borrowing with many in the west on the take as well. ''Aid in reverse: how poor countries develop rich countries''is how one observer sums it up.