No Financial System can Develop without a strong Domestic Sourcing, Funding of Growth. In a continent of 1.2 billion people and $2.5 trillion in GDP, total asset of the biggest financial institutions in the continent is less than $80billion, which is less than 5% of that GDP. But the Asian development bank alone has over $200 bilion, according to Oramah.
Prof. Benedict Oramah, president and chairman of the Board of Directors, Africa Export Import Bank, AFREXIMBANK said this at the UBA Africa Day Conversations streamed live Monday on Youtube.
He said total debt in Africa in 2006 was about $300 billion, but today it’s over $1 trillion. Part of the increase started with the commodity crises in 2015, which made many countries run into all sorts of deficits-both current account and fiscal.
This made them now start going again to borrow. And debt ballooned because many of the African countries had access to the commercial markets, the bond markets, syndicated loans and other forms of borrowing, apart from the usual bilateral sources.
“The debt has commodity origin because the commodity prices crashed, the countries ran into fiscal problems, current account problems and they had to borrow in foreign currencies. You have to build a more dynamic economy that is less dependent on commodities but dependent on the kind of goods and services, which are not vulnerable to episodic shocks we experience in Africa”
Oramah
“If we have domestic source of financing our growth will depend less on borrowing internationally,” he said, noting that if commodity prices fall, Africa borrow so much and a few years after, they ask for debt relief. But if Africa get away from commodities, develop its domestic financial market, it will put debt and debt relief problems behind.
“Africa needs to build a domestic capital market. Today we have 55 countries, the stock exchange are fragmented, not liquid and small. many economies do not have strong financial systems. I have never seen a country that develops without a strong financial system, without banks providing funding, without a diversified source of funding growth and development, Africa does not have it.”
Benedict Oramah
