Month: May 2021

economic recovery in the post COVID era – rich & powerful vs poor & weak

The powerful countries will be printing money as means of jump-starting their economies as part of the post COVID-19 economic recovery. And it makes sense! Folks need to make major investments in infrastructure and human capital development in order to get things moving again. What else are they supposed to do?

But it seems that many of the world’s poorest countries will not be allowed to even borrow modest amount of money to make any kind of investments. Our international partners will tell us that we can’t borrow because it might put us in moderate or high “debt distress” as shown by our DSA (debt sustainability analysis). They will tell us that there is a “speed bump” that we can’t cross over even if it means that our people will suffer and die. I am not sure what other options are there for us.

Our “development” partners will define debt in all sorts of ways just to ensure that our countries do not borrow any money to make the investments required to move our economies forward. When the COVID recovery is over, the gap between the rich countries which borrowed multiple times their GDP and poor countries which did not borrow anything and therefore could not make any investments will be wider than we have ever seen.

The debts of the rich and powerful can hit any limit but poor and weak are not allowed to borrow to do anything. Some of the poor countries are not even able or allowed to print their own currencies to replace mutilated notes.

The argument from our “development” partners is that we don’t have the “absorptive” capacity. I really have never understood what this meant. That if you built roads and power plant we will not be able to use (absorb) them? Because the monies that these countries want are for critical infrastructure needed to unlock the growth potentials in their economies. If these “binding” constraints are not removed, these countries will never make any progress. With poor infrastructure, there is no foreseeable way that these countries can escape the “poverty trap.”

The partners do not even want to have a conservation about which projects these countries want to undertake. All the partners care about is that these countries shouldn’t borrow. What if they want to borrow to build a power plant so that value-addition and light manufacturing can begin? The partners don’t care. For them, once you don’t have the money, you don’t deserve cheap power or better roads.

The partners don’t want us to borrow against future income. For them, it is against the rule of development. For them, you must have the money in hand (appropriated in your budget) before you can even begin the procurement process for anything. They say, it is irresponsible to borrow against future income. Really? I thought that was what the smartest business people did: borrow to invest and when the return comes, you pay back the debt.

If a country is expecting $100 million in future income over the next 20 years ($5 million per year) and the country wants to build a bridge that cost $80 million with a 2 year construction period. The partners demand that the country can’t borrow the $80 million to build the bridge in 2 years. Instead, the country should construct $5 million worth of the bridge every year until it is complete. This means that it may take 16 years to complete the bridge. Don’t you think that the portion of the bridge that was constructed in year one would be structurally challenged before we get to year 16?

I really have never understood the logic behind the argument of the partners. For me, the bridge in 2 years might even open up more opportunities such that we might not even miss the $5 million per year. Lots of other economic and social benefits would have accrued over those years.

Some times it makes me to wonder what the motives of these “development” partners are? Do they not care that these countries perish or they care that these countries perish? Seems that either way, these countries are perishing….

I arrived in Juba, South Sudan a few days ago. I came upon the invitation of the Government and I have spent some time talking to various officials and stakeholders. I have also spent some time talking to ordinary people on the streets. It has been fascinating!

Since the beginning of 2021, I have been putting more time on my advisory efforts: trying to work with governments and multinationals to navigate the complex paths of development and investments. I am not an expert but the fact is that I do have some experience. I have made a number of mistakes and I think folks can learn from those mistakes. I continue to argue that you don’t have to make the same mistakes especially when those made those mistakes are willing to share with their experiences with you – for a fee though. It can be more expensive when you decide to make your own mistakes.

For the newest African Republic, I believe that they should not have to make the same mistakes that other countries made: they can leapfrog into development if they chose the path less travelled. Orthodoxy won’t get them there.

I see that South Sudan has a lot of potential and holds great promise. But the few days I have spent here also show me that the challenges are enormous, daunting, and complex. Unless the Government and People of South Sudan thread very carefully, they might remain an under-developed country for a long time. But they chose the path of learning from the mistakes of others and I think they will get ahead faster. I don’t think time is on their side. They must act now and act fast.

My advice to them is: don’t do things the same way other countries have done it because you will get the same results.

If South Sudan wants to move forward faster, the political leadership must make some tough, unorthodox decisions. A lot of people will not like the decisions but after the results are shown, they will come to appreciate it.

My advice, if you ask me is DON’T LISTEN TO THEM. There is no where in the literature that shows that they have helped any country. It is time to tell them, thanks but no thanks and move forward.

Here is my argument: moving with THEM will lead you nowhere. If you move without THEM and get nowhere, you have lost nothing. But moving without THEM holds the possibility that you could get there faster.