In contemporary history, the public debate around the proper way of dealing with debt crises and the call for debt relief for SADC countries gained momentum in 1980s
Followed by global debt Campaign, known as Jubilee 2000 which led to the cancellation of more than $100 billion of debt owed by 35 of the poorest countries including SADC countries
Public debt comprises all outstanding loans and guarantees that a central government owes to its creditors. This debt may be internal e.g. commercial banks or other institution within the government’s territory; or external, as received from foreign governments or international institutions such as the World Bank or ADB
Since 2008, public debt in sub-Saharan Africa has been rising at an increasingly rapid pace. By 2016, just eight years later, sub-Saharan Africa’s gross public debt to GDP ratio had doubled.
Nowadays a much larger share of African debt is held by private banks and bondholders compared to the 1990s, when most African debt was held by Global North countries (such as the UK) and multilateral institutions like the World Bank & IMF. Yet the cost of finance from commercial creditors is often painful for African countries
However, the amount of public debt a government holds does not itself indicate that government’s economic strength or weakness.
Often, strong economies are quite active with international Trade and have large amounts of public debt. Instead, the ratio of that public debt to the government’s Gross Domestic Product (GDP) is a more accurate (capacity to debt serving)
SADC Member States are advised to maintain a public debt-to-GDP ratio of no greater than 60%.
Through the 1990s, most SADC Member States experienced high levels of external debt. At US $62.12 billion in 2001, external debt was greater than 100% of the GDP in Angola, Democratic Republic of Congo, Malawi, Mozambique, Tanzania, and Zambia.
At that time, five of these SADC Member States qualified for the Highly Indebted Poor Countries Initiative, a programme launched by the World Bank and IMF to offer debt relief for nations with unsustainable debt burdens includes Tanzania & Mozambique
Public debt in some of the Southern African Development Community (SADC) countries has reached alarming and unsustainable levels.
Necessary services, such as public transport, water infrastructure, education and healthcare, as well as development projects, continue to be severely affected as governments have to use resources to pay off massive amounts of debt.
Funds intended to improve people’s lives to instead pay the high interest rates associated with these loans; as a result, many have defaulted on their repayments
Countries that benefited from HIPC, such as Zambia, are back in the jaws of unsustainable debt. Southern Africa that owe large amounts of money are failing to deliver on essential public goods and infrastructure. These public services are well captured in bills of rights, and making them a constitutional obligation
Research by Jubilee Debt Campaign 2017 Indicates that; 44% of government revenue is spent on repaying external debt, only 6% is spent on public health. Public health in Angola is in crisis. As recently as 2015, the country had the highest rate of child mortality in the world.
At the end of 2017, Angola’s debt to China amounted to $21.5bn – this is about half of Angola’s total external debt
Zimbabwe is in long-term debt default, Since the coup in November 2017, the UK has strongly backed the country’s new leader,
Mnangagwa wants Zimbabwe to participate in a debt restructuring process led by the IMF
A debt restructuring deal would mean that Zimbabwe repays about $1.8 billion of arrears to lenders to enable the country to borrow again. Zimbabwe’s total foreign debt is estimated to be $11.5 billion.
June 3rd 2019, Minister of finance and planning presented that. In 2018/2019 budget, the government allocated Tsh.1.41 trillion equals to $ 434.9 million for payment of domestic interest. As to April 2019, Tsh.1.04 trillion payments were made which is equivalent to 75.18 per cent of the target. The government set aside Tsh. 689.67 billion equivalents to $ 296.6 million for servicing interest raised by foreign debts, and Tsh.588.30 billion was paid as by April 2019 equals to 85.30 per cent of objective.
Debt servicing budget is higher than the Ministry of water, Agriculture and education budget. Water702 billion in 2017/2018; Agriculture 143.33 billion in 2018/2019; Education 1.40 trillion in 2018/2019
Mozambique’s debt is currently in distress, and total public debt is on an unsustainable path. Mozambique plans to spend 35 billion meticais servicing public debt next year 2020, 3.4% of gross domestic product (GDP), and more than the state budget allocation for health, which in 2019 targeted to receive 27.9 billion meticais. Servicing domestic and foreign debt will consume an unprecedented 15% of all the revenue that the state expects to collect.
Public debt servicing costs, which at the end of 2017 amounted to US$12.7 billion, represent almost ten times more than the allocation for all social protection programmes in Mozambique, which in 2019 will receive only 3.9 billion meticais
Zambia’s external debt rose to $10.05 billion at the end of 2018, Debt-to-GDP ratio has increased from 25% in 2012 to more than 70% in 2018 through a combination of regular borrowing from the Chinese and other development partners. Zambia’s foreign debt includes money that it raised through Eurobonds and other loans from bilateral and multilateral partners. External debt servicing in 2018 year reached $759.9 million
The 2019 budget highlights that external debt service payments will increase by 90% in 2019 to $1.4-billion. Debt service costs, accounted for 27% of all revenue rose in 2018. Health Budget for 2019 proposed to spend 8,069.70billion ZMW, about 9.30% of the general budget. Education budget for 2019 proposed to spend 13,174.55 billion ZMW about 15.29 % of the general budget
Note: Some $750m of Eurobond debt matures in 2022, $1-billion in 2024, and $1.25-billion between 2025 and 2027. The grace repayment period on some of the larger Chinese loans also ends in 2020.
The public debt (both foreign & domestic debt) of the countries of SADC has a major influence practically in all areas of the life of SADC population. In response to the growing problem of indebtedness, SADC adopted a memorandum of understanding on macroeconomic governance in 2011, with the aim of reducing public debt. The memorandum also demanded that governments should be transparent about public resource management. But the results are far from offering confidence to tackle the debt crisis countries are facing now. Fiscal policy is deeply intertwined with politics since it is mostly about redistribution of services across individuals, regions and generations: the core of political conflict.