Decade after Debt Relief, Africa's Rush to Borrow Stirs Concern.

     
As African states line up to join the growing club of dollar bond issuers, economists and analysts warn of a slide back into indebtedness that could undo recent economic gains and create a “Eurobond curse” to match the distorting “resource curse.”
     
“Eurobonds have become like stock exchanges, private jets and presidential palaces. Every African leader wants to have one,” said one investor, asking not to be named.
     
In 2007, Ghana became the first African beneficiary of debt relief to tap international capital markets, issuing a $750 million 10-year Eurobond. Since then, previously debt-burdened countries, such as Senegal, Nigeria, Zambia and Rwanda, have also put their names on the list of bond issuers.
        
Governments seeking to replace declining foreign aid and pay for infrastructure are also taking concessional funds from multilateral institutions, more expensive commercial bank loans and bilateral financing from lenders like China and Brazil.
     
No sub-Saharan countries are in immediate danger of default and most are largely financing themselves domestically, but the debt build-up is stirring up troubling memories of the past.
     
“The financial sector loves to find people to prey on and their most recent prey are governments in developing countries,” Nobel prize-winning economist Joseph Stiglitz told Reuters in an interview during a conference in Johannesburg this month.
     
“They get overindebted, they get a bailout from the World Bank and IMF and they start over again. I think it's unconscionable, but their memory is short and their greed is large, so it's going to happen again,” said Stiglitz.
         
Up to 30 low-income sub-Saharan African countries had their debts reduced under the IMF and World Bank's Highly Indebted Poor Countries (HIPC) initiative, which was later supplemented by the Multilateral Debt Relief Initiative (MDRI).
     
An estimated $100 billion of debt was wiped out, easing countries' onerous debt burdens, often the result of loans taken on by corrupt regimes. These had meant more being spent on debt service payments than on health and education combined.
    
 

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