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Economic Development in Africa Report 2016

Debt Dynamics and Development Finance in Africa

image of Economic Development in Africa Report 2016
Africa has major development aspirations in the broader context of a global and continental economic development agenda. This calls for substantial financial resources at a time when the global development finance landscape is changing, from a model centred on official development assistance and the coverage of remaining financing needs through external debt, to a framework with greater emphasis on the mobilization of domestic resources. The Economic Development in Africa Report 2016 examines some of the key policy issues that underlie Africa’s domestic and external debt, and provides policy guidance on the delicate balance required between financing development alternatives and overall debt sustainability. This report analyses Africa’s international debt exposure and how domestic debt is increasingly playing a role in some African countries as a development finance option, and also examines complementary financing options and how they relate to debt.

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Domestic debt dynamics in Africa

A key development over the past decade has been an increasing reliance on domestic debt markets by African Governments to expand their net borrowing, in most cases reflecting a need to fill the gap created by a decline in official development assistance as a share of total external flows. Achieving high and sustainable levels of investment needed for Africa’s development will require a combination of foreign and domestic resources. This may increase ownership of the development agenda and enhance the effectiveness of strategies and the focus on sectors in which investment is most productive. At the same time, with domestic debt playing an increasingly important role, countries will face new risks as the numbers of creditors and debt instruments continue to expand, and domestic debt will become instrumental in assessing public debt sustainability owing to its size and swift growth.

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