By Yohannes Fentahun
Domestic debt plays a significant role in the development of African countries.
The remark came at a workshop focusing on the domestic debt problem in Africa being held in the UNECA, Addis Ababa.
Domestic debt has become increasingly important in several countries over the past two decades. Domestic debt offers an alternative source of financing for African countries, particularly for those with relatively limited access to international financial markets.
Opining the workshop Zuzana Schwidrowski Director for the Microeconomic and Governance Division of UNECA echoed the increased importance of domestic debt in Africa.
Africa's public debt is rising, and many of its nations are either already in or soon will be in financial distress. Debt vulnerability has been made worse by the COVID-19 pandemic, the conflict in Ukraine, and the knock-on effects of high interest rates in many developed nations.
Themed 'Unraveling the Domestic Debt Problem' the workshop is organized by the Microeconomic and Governance Division of the United Nations Economic Commission for Africa.
According to the director domestic debt plays a significant role in the development of African countries. Governments borrow from domestic sources to finance a variety of projects, including infrastructure, education, and healthcare. She, however, cautioned that high levels of domestic debt can also be a burden on an economy, leading to inflation, currency depreciation, and reduced investment.
Sharing Ghana's experience in domestic debt restructuring AfriCatalyst CEO Daouda Sembene said Ghana has been considering domestic debt restructuring as a way to address its high levels of public debt. In 2022, the government announced plans to restructure its domestic debt as part of a broader economic recovery plan.
Domestic debt restructuring is closely tied to countries' expectations of external debt restructuring from international institutions.//