I would like to thank the organizers and the Government of Japan for holding this follow-up meeting to the seminar in Tokyo last year. I think a great many useful things were said there, and they are more relevant today than ever.
The debt strategy has been successful in resolving the global debt crisis. Almost all of the major debtor countries have put their external debt problems behind them. They have regained access to normal international capital flows, and have returned to healthy rates of economic growth.
Most of the world’s developing countries have used external indebtedness to finance their development. Today, this indebtedness is the main obstacle to the economic growth of these countries as a whole, and of sub-Saharan Africa, in particular.
There is a tendency in today’s world of robust, albeit at times skittish, capital flows to developing countries to say that the developing country debt crisis is over, and that, consequently, the challenge of external debt management is not as urgent as it was just a few years back. There are at least three reasons why this is not quite right. First, debt distress remains a central economic reality for the majority of low-income countries. Second, there are new countries, arising out of the former Soviet Union and Yugoslavia, that are embarking on borrowing programs without the necessary infrastructure or regulatory and legal frameworks that permit adequate management of the borrowing process. And, third, there is recidivism; that is, the possibility either that the lessons learned from past practices were inadequately retained, or that the lessons had changed.
Africa’s current financial crisis is a tragic legacy of the debt management strategy of the 1980s. Africa became more debt distressed than any other region in the world. The U.N. Secretary General once remarked that this external debt is a “millstone” around the neck of Africa. Africa’s overall economic situation deteriorated as the debt burden worsened in many of the region’s countries, and some are even seen to be in a “debt trap” or a “debt treadmill,” which forces them to obtain new financial resources simply to repay old debts.