Since the 1980s till date,most African countries have been borrowing from international financial institutions and the governments of various foreign wealthy countries to finance their countries’ respective national budgets of infrastructures and to also meet up with recurrent expenditures. Such financial institutions include the following such as the: World Bank (WB) also known as The International Bank For Reconstruction and Development (IBRD), International Monetary Fund (IMF), African Development Bank (AFDB), Paris Club, China, and other international donors institutions which had adverse implications on African or undeveloped economies!
One of the adverse effects on the national budgets of African and under-developed economies is the constant depletion of nations’ budgets as a result of loan servicing of high-interest rates paid on the principal loans borrowed. This implication is that little amount of funds is left for both capital and recurrent expenditures on a monthly and yearly basis!
This constant borrowing does not augur well for the African continent’s economies.
Most African countries are poor and under-developed, battling and struggling to survive, and are poverty-stricken countries!
I never believe in Nigeria and other African countries’ constant borrowing from China, International Monetary Fund (IMF), African Development Bank (AFDB), and other international donors/financial institutions with a view by the Nigerian Government to invest in public infrastructure.
It is majorly because Nigeria and some African countries are mono-product and consuming economies.
The mono-product economy is a situation whereby countries are solely dependent on a single product of majorly agricultural products or petroleum products to run their economies. That is why the governments of African countries have embarked on and resulted in constant borrowing from foreign international donors and financial institutions.
The conditions for borrowing are adversely affecting our national budgets and economies.
African Economists must be ready at all times to challenge and question the International Monetary Fund (IMF), World Bank(WB), African Development Bank (AFDB), and foreign economists on their policies, models, and theories put in place beginning with historical and contemporary economic models and theories!
Now, the million-dollar questions are:
Should the government of African countries continue to depend constantly on the IMF, WB/IBRD, AFDB, China, and other international financial institutions and wealthy countries to finance their economies and national budgets?
Should the government of African countries continue to depend constantly on the IMF, World Bank, AFDB, China, and other international financial institutions for loans to put in place infrastructures?
Note that as African countries keep on borrowing from various foreign financial institutions, the more our local or national currencies is further devalued which by economic implications and international trade makes the import of goods more expensive because our importers will have to pay more for the importation of goods and services for import duties while export of goods becomes cheaper and this by implication will have adverse effects on African countries balance of payments and balance of trade respectively. This will also lead to an unfavourable balance of payments and trade.
Firstly, African countries should begin to diversify their national economies (all sectors). Let us do away from being mono-product economies and vigorously pursue more than one product economy. We can tap into the agricultural, solid minerals, and petroleum sectors.
Secondly, African countries should lay more emphasis on becoming producing economies. We should produce more products to revitalize moribund industries thereby leading to an increase in exports of our rich products. The more we produce commodities, the more the increase in African-generated revenues to finance national budgets to run the economies of African countries.
Thirdly, our economists and intellectuals must begin to challenge and question some of American and European economists’ models and theories. African Economists and intellectuals must also develop economic models that are suitable and appropriate to the economic realities of the African continent.
Fourthly, African countries should embark more on industrialization drive to produce finished commodities from raw materials thereby creating more job opportunities for the teeming unemployed African population.
In conclusion, the need for judicious management of resources is imperative in order for African countries to see and witness rapid economic growth and development.
Yes, African countries can definitely compete favourably with other world economies!
©Mr Simeon Okoro is an economist, and a professional teacher of economics, commerce and financial accounting, He is a writer and a researcher on the economy, politics, fiction, non-fiction, novels and prose.