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….
James F. Kollie, Jr. 
Thanks Dr. Kollie for these great points. You’ve said it all. And what I believe is that countries, especially the poor ones need to think critically, and put in place mechanism to reduce wasteful spending.
Our budgets need to be used wisely.
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Thanks for using your enriched experience to give many of us an insight into what usually takes place between our leaders and development partners. But given such a difficult position which you have expertly outlined, it’s like we find ourselves between a rock and a hard place. My question is: must we credit by all means (given the obvious predicament) before we develop our countries? Can we follow the model used in Tanzania under the late beloved President Magufuli (“Magufulification”) or President Kagame’s model?
Whatever model we employ, we must fight day and night to empower our people, thus, reducing the growing anger and hate in the midst of our people. I agree with Nicholas Dweh Nimley completely with regards to drastically reducing corruption, hence, reducing wasteful spending. Corruption kills us more than anything. Even if it is possible to credit billions of dollars, it will not yield maximum benefit for the masses as long as corruption is still a friendly companion of many of our countries. While reducing waste by fighting corruption, we probably have to confront the hard reality by thinking inwardly – innovatively tap into the vast opportunities and create wealth for our people.
Thank you again, sir.
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Emmanuel, for as long the economy is severely constrained, we will continue to argue that corruption is the primary problem while we all continue to suffer and languish. Even the wealthy countries have “corruption” but it is less of an issue because those economies are thriving and the people are doing well.
Let me be quick to state that indeed, corruption, no matter how small is a problem and should be eradicated. There is no justification for corruption in any form. However, these poor countries need more than the fight against against corruption.
I usually tell people that we have a revenue problem and not necessarily an expenditure problem. The economy is small and not producing much. I am not sure how much we can save from a $500 million budget per year to build the infrastructure that we need bearing in mind that are people need education, security, healthcare, clean water, etc today. There is no way we can stop/cut those spending to focus on infrastructure and without doing infrastructure in a big way we will always be in the same position – arguing about expenditure cuts and corruptions.
We need to think big and focus – like businesses and wealth countries, we need to use the power of leverage or we will be here for eternity
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