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0 Andrew Dabalen, the Chief Economist for the Africa Region at the World Bank, has urged African leaders to be mindful of the terms of borrowing when negotiating with creditors.
He underscored the importance for African governments to diversify their financing sources, taking into account the cost of financing they receive from creditors such as the International Monetary Fund, World Bank, and others.
He highlighted, “What is important is not so much about whether in fact they should go into commercial diversification or whether it’s affordable. And I think the most important thing for countries is to keep in mind the cost of financing that they are getting and the terms upon which they are borrowing. Be very transparent about the terms of the borrowing.”
He further advised African leaders to steer clear of high-cost debts, as interest rates are likely to surge during repayments due to potential shocks.
“And try to avoid expensive debts that are short term. Because whenever there’s a shock in the world, there are always going to be shocks in the world that affect interest rates. If it’s already high, it will even be higher, and short maturity is going to be a very painful adjustment.
“And so that is what we advise countries to do. To be very cognizant of the terms of borrowing, be transparent about it and try and avoid very expensive debts. That will incur all kinds of hardships,” Mr Dabalen cautioned.
