Economic Development in Africa Report 2016

Debt Dynamics and Development Finance in Africa

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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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Complementary modalities for financing development in Africa

The previous chapters have shown that domestic and external debt are on the rise in Africa and that ensuring debt sustainability will pose a limit to further increases in debt. With dwindling traditional financing, the question arises as to how the increasing financing needs of the continent can be met. There is a wide range of complementary modalities of development finance that tap and leverage existing resources. These modalities range from public–private partnerships, sovereign wealth funds, remittances and diaspora bonds, GDP-indexed bonds and climate-related funds to the use of new special drawing rights allocations and international reserves, and policies stemming illicit financial flows.

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