Rodrigue Fenelon Massala
For many years, public debt has been steadily increasing in many African countries. Senegal, Gabon, the Republic of Congo, and Zambia are facing growing financing needs, increasing budget constraints, and difficult negotiations with their creditors. In this context, debt restructuring appears as a necessary remedy to prevent insolvency, in other words, default. However, the experience of several countries shows that International Monetary Fund (IMF) assistance programs, aimed at restoring macroeconomic stability, can sometimes lead to a cycle of financial dependence.
Indeed, it should be noted that over the past two decades, many African countries have increased their borrowing to finance infrastructure, social spending, and development projects. However, weak tax revenues, commodity price volatility, external shocks, and the economic consequences of the Covid-19 pandemic have weakened their repayment capacities.
In 2020, Zambia became the first African country to default on its sovereign debt in the context of the pandemic. Congo-Brazzaville, heavily dependent on oil, has gone through several phases of debt restructuring. A hidden debt contracted from China, outside the usual channels, was at one point a sticking point in negotiations with the IMF and the World Bank.
Despite its abundant natural resources, Gabon continues to face persistent budget imbalances. As for Senegal, long considered a model of economic stability in West Africa, it is now facing a rapid increase in its debt and growing concerns about the sustainability of its public finances. Until recently, the country refused to consider debt restructuring, preferring other alternatives.
The vicious circle of IMF programs
Former Senegalese President Abdou Diouf recently declared: “I governed in pain” when referring to the IMF’s structural adjustment programs. This statement summarizes the political, economic, and social difficulties he faced in Senegal.
In the 1980s and 1990s, many African countries, including Senegal, had to implement structural adjustment programs in exchange for international financial support. These programs aimed to restore macroeconomic balances, but often imposed unpopular measures.
While IMF interventions frequently help avoid an immediate financial crisis, they also face many criticisms. The conditions generally associated with financial support include:
– reduction of public spending;
– elimination or reduction of subsidies;
– increase in certain taxes;
– public sector reform;
– privatizations or increased competition.
These measures aim to restore budget balance. However, they can also slow economic growth in the short term, reduce the purchasing power of populations, and increase social tensions.
In several African countries, the same pattern seems to repeat itself: a state borrows to finance its development, encounters repayment difficulties, seeks IMF assistance, implements austerity policies, sees its growth slow down, and then resorts to new borrowing to support its economy or finance its social needs. The cycle then starts again a few years later.
This dynamic creates what some economists describe as a “debt trap” or “dependence on adjustment programs.”
Cases of Senegal, Gabon, Zambia, and Congo-Brazzaville
Senegal
Senegal has long benefited from the trust of international investors. However, the accumulation of public debt, the rise in global interest rates, and the increasing financing needs have strengthened the country’s budget vulnerabilities. Authorities must now find a balance between financial stability and preserving the necessary investments for development.
Gabon
Gabon illustrates the difficulties faced by economies heavily dependent on commodities. Fluctuations in oil prices have regularly affected public revenues, leading to several agreements with the IMF and sometimes socially costly budget adjustments.
Zambia
Zambia has become a symbol of the challenges posed by external debt in emerging countries. Its default has highlighted the complexity of negotiations involving diverse creditors, including multilateral institutions, private investors, and China.
Congo-Brazzaville
Congo-Brazzaville has experienced several episodes of over-indebtedness due to its strong dependence on oil revenues. Despite various restructurings and reform programs, the country still faces structural challenges in terms of economic diversification and financial governance.
Towards a new approach?
Faced with the limitations of traditional solutions, many experts advocate for a reform of the international debt management system. Several avenues are regularly mentioned:
– greater transparency in public borrowing;
– faster and more predictable restructuring mechanisms;
– better coordination among creditors;
– development of African regional financial markets;
– strengthening of national tax revenue mobilization;
– targeted investments in value-added sectors.
The challenge is not only to reduce the burden of debt but also to enable African economies to sustainably break free from their dependence on external borrowing, which tends to resemble a vicious circle.
In light of the above, it seems legitimate to emphasize that debt restructuring is often a necessity for African countries facing a financial crisis, but it should not be seen as a panacea. When accompanied by adjustment programs that can slow growth and impose new budget constraints, it risks fueling a recurrent cycle of debt and dependence.
This is precisely what former Senegalese Prime Minister Ousmane Sonko consistently rejected. According to him, restructuring would be seen by financial markets as an admission of incapacity to honor Senegal’s sovereign commitments. Such a move could, in his view, bring the country closer to a situation of “near-bankruptcy” and weaken its international credibility. He also believed that a restructuring negotiated under the auspices of the IMF could lead to austerity policies or constraints reducing the room for maneuver of national authorities.
All in all, the experiences of Senegal, Gabon, Zambia, and Congo-Brazzaville show that the solution does not only lie in rescheduling or restructuring debts. It also involves a profound transformation of economic models, diversification of revenue sources, strengthening of domestic resource mobilization, and the construction of more resilient financial institutions.
