Banga, on Thursday, at a joint IMF – World Bank seminar, said the debt servicing ratio is more than the continent’s education and healthcare budget combined.
“Sub-saharan Africa, these days, is paying for all the reasons Kristiania pointed out – interest rates are doubled and so on,” he said.“They are paying 7.6 percent of their GDP to pay back the interest cost on debt. You could say is 7.6 percent so bad – for comparison, what they spend on education and healthcare together, is 5.6 percent.”
According to Banga, it also affects the ability of domestic banks to adequately support the private sector with loans, as the financial institutions have to back the government financially.Banga said if foreign investors consider the impacts of governments’ debts on their ability to invest in critical sectors and infrastructure, as well as the impact it has on the banks, they would not want to invest their money in Africa.
“So basically, it is a casketing issue of bad news. It starts from paying too much for your debt, that crowds up what you can spend on other things, the private sector gets crowded out and overseas people don’t come in – all four things add up.”
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