The West continues to terrify us about debt and especially debt from China even though many of them do borrow from China.
When the IMF comes, the conversation is always centered around DSA (debt sustainability analysis) and debt to GDP. We talked about “speed bump” and threshold.
They try to convince us that we can build our infrastructure from domestic resource mobilisation even though they can not point to any place on earth where that has happened.
Without the needed infrastructure, there is no way you can expand and grow your economy and by extention your tax base. All that DRM cliché is crap: it doesn’t work. It hasn’t worked anywhere.
In private sector, we use Other People Money (OPM) to create and deliver value and then we keep the profits. Even the richest people on earth still borrow money.
I decided to post a link so we can see the Debt to GDP ratio of some of the richest countries in the world and decide for ourselves.
Let’s borrow, build our infrastructure and improve the living conditions of our people and then worry about repayment later. That is what all the smart countries and people are doing.
Debt and who we borrow from are not the problems. What we do with the borrowed money is the problem.
You see! They are all borrowing to keep moving on…
5 thoughts on “Debt and Development: the scary story”
We don’t have a trusted public service to manage even domestic resources without malfeasance, it would be even riskier to burden the country with huge debts, and when fruit of the debt hangs only in the hands of public officials. If we cannot manage the little we have without stealing from ourselves, how can we inspire confidence that foreign [debt] monies will be managed properly. This is the overarching fear I tend to agree with.
I don’t disagree with you. However, without borrowing, we will continue to be right here. The larger point is that with borrowing, there is a possibility, not a guarantee that we will make progress. But with borrowing, the evidence is living with us: we will never make progress. That is a guarantee
Dr. Kollie, thank you for an interesting piece to read since we have a quasi holiday today. I agree with you that without the needed infrastructure both soft and hard, we will be unable to transform our economy and hence, improve the lives of our people. I also like your agreement with Mr. Nyanplu on the need to strengthen the public service since the effectiveness of such borrowings will depend largely on a disciplined, well-trained. Professional and patriotic workforce in Government. The flip side is incessant borrowing without the require planning, corruption without recourse to due process, project padding etc…which also increases the attraction of misfits into public service. How effective are we in accounting for our resources today? I believe, the government should instead focus on the private sector as the engine of growth because when a private consortium borrows $100M for a port project, they typically ensures all factors within their control have been adequately addressed and measured put in place to generate profitability to payback the loan (though private ventures do fail sometimes). Let the government be a partner to the process and create the enabling environment for such ventures to thrive which will then spur Economic growth via job creation, taxes, infrastructure and human resource Development. My simple take on the matter
Malcom, I do agree that leveraging the private sector to build our infrastructure is one piece of the puzzle and I do support that. However, there are other instances like road connectivity and transmission line for power (not power generation) that requires the intervention of the state and that made not be attractive to private sector. In some of those instances, guarantees would be required by the state and these guarantees are equivalent to borrowing.
In essence, I m not advocating borrowing to the exclusion of other creative financing mechanisms. I am only trying to say that those artificial bottlenecks that the traditional actors pose for us such debt-to-GDP ratio should not be our Bible. In fact, they are being hypocritical because they don’t live by those guidelines
I do agree development has a direct correlation to debt; however, I also think it’s good practice first to create a sustainable governance environment that will give such investment a chance at surviving. All nations are borrowing; however, what does the ROI looks like for developed countries as compared to underdeveloped countries. What can we attribute these disparities to?