Akinwumi Adesina (left), President of the AfDB deconstructs the words of David Malpass, President of the World Bank. The question of Africa's indebtedness remains unresolved.

The different stories of the World Bank and the African Development Bank on Africa add a little to the confusion on the real state of the African continent's indebtedness. But, behind the statistics brandished by the two institutions, there is an old rivalry and a divergence dictated by the very nature of the two organizations.

The subject of the dispute
For the President of the World Bank, David Malpass, who spoke on February 10 at a forum organized in Washington, African States are too indebted because, among other things, of the laxity of certain institutions, including the African Development Bank, which does not would not apply robust criteria. “David Malpass believes that the Asian Development Bank, the African Development Bank and the European Bank for Reconstruction and Development, were contributing to the debt problem. “We are faced with a situation where other international financial institutions and, to some extent, development finance institutions as a whole – and in any case official export credit agencies – have a tendency to over-lend. easily, which aggravates the debt problem". And David Malpass to point the finger at the Asian Development Bank, accused of "pushing billions of dollars" towards a Pakistan already in a difficult situation vis-à-vis China, with which it is heavily indebted, and the AfDB of doing the same thing in Nigeria and South Africa.

AfDB refutes World Bank President's comments on Africa's debt profile

Lapidary remarks that the President of the African Development Bank, Akinwumi Adesina, rejects as a whole, recalling the moderate profile of African debt and castigating the posture of Malpass, known for his vision rather "against the spirit of multilateralism". The AfDB's commitments in Africa are 10.1 billion dollars in 2018 against twice as much, or 20.2 billion dollars, for the World Bank. With regard to Nigeria and South Africa, the AfDB continues, the World Bank lent them in 2018 respectively 8.3 and 2.4 billion dollars, against respectively 2.1 and 2.2 billion for the AfDB. . These figures undermine the argument of the World Bank on an overly generous AfDB. Especially since, behind, the AfDB specifies that in June 2019, Nigeria's public debt reached 83.9 billion dollars (14.6% more than in 2018), or 20.1% of GDP. Far from the case of Pakistan.

Last year, South Africa's public debt reached 55.6% of its GDP, well below the arbitrary ceiling of 70% observed by the multilateral institutions towards developing countries, those developed having, them, of unlimited credit power. This open dispute brings up to date the old rivalry between the two institutions and the pessimism of the World Bank which had already, in the 1960s, advised against Africa creating a development institution because it was not mature enough. Also, the skepticism of David Malpass about multilateralism is not to help the World Bank to reconsider its approach to debt and, particularly, the danger of the debts of emerging countries.

What about Africa's real indebtedness?
Is Africa too much or little indebted? Viewpoints diverge and range from blissful moderation to exaggerated alarmism. In 2018, the continent's debt amounted to 1,330 billion dollars, or 60% of continental GDP, or even 1,060 dollars per capita, report the authors of "African economy 2020" published by La Découverte editions. Compared to France, Italy and Japan, which have ratios ranging from 100 to 200% of their GDP, Africa is relatively low in debt. On the other hand, to see the rapid increase in this debt, which was only 35% of GDP in 2010, there is cause for concern. This, especially since, between the cancellation of debts within the framework of the Heavily Indebted Poor Countries Initiative and 2019, debt service has once again become the first budgetary item in practically all the countries of the continent. The question then is no longer so much Africa's indebtedness as the sustainability of its debt? Repayment capacity is the subject of many studies by rating agencies. “In ECOWAS, the debt burden has almost doubled today compared to 2010 and seems unlikely to decrease, which raises concerns about its sustainability. This trend is accompanied by potentially significant economic and social costs,” warns Lucie Villa, Vice-President and Senior Credit Officer at Moody's in a report published on February 17.

In the eyes of the rating agency, the 15 countries of the Economic Community of West African States (ECOWAS) are not all housed in the same boat. Senegal and Côte d'Ivoire, for their part, show the best performance in terms of financial management, while their Ba3 rating is higher and is accompanied in both cases by a stable outlook. While Togo (rated B3, stable outlook), and to some extent Ghana (B3, positive outlook) and Nigeria (B2, negative outlook) are among the “countries at risk”, Mali and Niger remain particularly “sensitive to shocks likely to significantly increase the debt burden and deteriorate their sustainability.

A situation which, according to Moody's, is all the more worrying since "all the ECOWAS States that we rate, with the exception of Nigeria, have benefited from debt relief under the initiative in favor of heavily indebted poor countries (HIPC) offered by the international community. As a result, “the weight of their debt fell from about 80% of GDP on average in 2000 to 30% 10 years later”.

But, ultimately, Africa is far from over-indebted. "How can we say that Africa is over-indebted when in many crucial areas, it is totally unfunded", protests Lionel Zinsou in an interview published in l'Economiste.fr. With an average debt ratio of around 55-60% of GDP, the debt burden of African countries remains much lower than that of developed countries, writes the former Prime Minister of Benin. Loans to companies and households, which greatly exceed 100% of GDP in developed countries, only account for 20% in Africa. “Africa lacks financial oxygen”.

An African debt that escapes the OECD
The World Bank is reputed to be close to Washington (an assertion all the more true since its current president, David Malpass, former under-secretary for international affairs at the US Treasury Department, was imposed at the head of the institution in April 2019 by the White House while the one who was interim president of the institution for two months, Kristalina Georgieva, foal of the USA, took the reins of the IMF in September 2019) and of the creditors of the OECD.

The African Bank, uterine sister of the Organization of African Unity, which has become the African Union, rather supports African countries in the diversification of their economies and... of their donors. However, the World Bank and the IMF have always taken a dim view of this strong rise in the outstanding amount of emerging countries in the structure of the balance sheets of African countries.

Unfamiliar with these mechanisms and not having reporting tools on these debts of emerging countries, the World Bank and the IMF tend to consider them as hidden debt to be opposed to the "Lucite debt" of OECD countries .

Should we follow the Bretton Wood institutions and give up the non-negligible share of financing from China, Turkey, Russia or India, often granted on competitive terms, in the form of oil, gas or iron ores for infrastructure? African states have apparently made their choices based on economic rationality by favoring the alternatives of emerging countries to flexible conditionalities compared to the bureaucratic procedures of traditional creditors.

Thus, the outstanding debt of the Paris Club on Africa rose from 67 billion dollars in 2010 to 44 billion in 2017, while the overall outstanding balance of bilateral creditors increased over the same period from 70 to 128 billion dollars. dollars. This decline is also the result of recourse by African states to the international debt market. Eurobond issues represented a real alternative between 2010 and 2016 but are currently encountering a limit due to the rates at which the loans are denominated (African States pay an additional cost, with a similar rating) and the rapid weight that these loans constitute in the State budgets and the structure of GDP. Emissions represent 15% of Senegal's GDP and 12% of that of Côte d'Ivoire.

"In the 39 African countries classified as low-income, the number of countries where the external public debt is deemed to be at high risk of over-indebtedness or in a situation of default has thus increased from 7 to 19 between 2014 and 2018", estimate Christophe Barat. , Public Enterprise Governance Project Manager, French Development Agency (AFD) and Hélène Ehrhart, Development Economist, in an article published in “The Conversation”.

What is the solution to debt?
As paradoxical as it may be, the solution to Africa's indebtedness is still indebtedness, but better, more structured and more transparent. Faced with the deficit in terms of infrastructure (143 billion dollars), needs in terms of education, health and basic services, the continent cannot renounce indebtedness and the necessary competition between its various partners. Here too, the World Bank and the AfDB do not have the same approach. The first, joined by the IMF, pleads for an increase in tax revenue targets without measuring the political and social consequences in informal economies at 90% and where 70% of SMEs disappear before reaching five years. The AfDB is calling for the mobilization of domestic resources through the mobilization of dormant deposits in pension funds, insurance companies and sovereign wealth funds.

Shouldn't the World Bank and the IMF take an interest in tax evasion by multinationals, the countries' loss of earnings on their oil and mining resources and agree to new conditions to make available to the continent a concessional debt oriented towards the realization infrastructures ?