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Essay APC2602 - Political Economy Of Africa THE ORIGINS OF AFRICA'S DEBT BURDEN AND THE ROLE OF THE MDRI IN REDUCING THE DEBT R50,00
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Essay APC2602 - Political Economy Of Africa THE ORIGINS OF AFRICA'S DEBT BURDEN AND THE ROLE OF THE MDRI IN REDUCING THE DEBT

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Essay APC2602 - Political Economy Of Africa THE ORIGINS OF AFRICA'S DEBT BURDEN AND THE ROLE OF THE MDRI IN REDUCING THE DEBT

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  • February 21, 2022
  • 4
  • 2016/2017
  • Essay
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THE ORIGINS OF AFRICA’S DEBT BURDEN AND THE ROLE OF THE
MDRI IN REDUCING THE DEBT BURDEN
INTRODUCTION
MDRI, as agreed by the G8 in June 2005, was put into action with
the aim to erase as much as 100% of the debts owed by qualifying
countries, the vast majority of which are in sub-Saharan Africa.
Hopes for a major impact on poverty are unlikely to be realized but
it does not imply that the MDRI is meaningless.
ORIGINS OF AFRICA’S DEBT BURDEN
Africa has seen rising debt levels, at least up until the mid-1990s.
Few African governments have had access to private capital
markets, and almost all their borrowing has been from official
sources, such as bilateral donors (e.g. UK) or the multilateral
agencies (e.g. World Bank, IMF). Unlike private markets, these
institutions provided loans at very low fixed interest rates with
long grace periods (e.g. IDA provides 40-year loans at .75% interest
and a 10-year grace period).
Africa’s rising debt levels are more the result of slow economic and
export growth mixed with the perverse effects of the international
aid system. Countries borrowed funds on extremely soft terms,
but they were still unable to repay the loans because those
investments never produced the expected gains. Thus, the rise in
Africa’s debt rations is in many ways not so much a problem with
the numerators growing too fast, as it is of the denominators
growing too slowly.

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