Book Review: Better Borrow; Gregory Smith

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Where Credit is Due: How Africa’s Debt Can Be a Benefit, Not a Burden

Gregory Smith
Hurst Publishers, London, UK, 2021, 240 pages, $ 34.95

Many African countries need to increase their investments and standard of living, but have low domestic incomes and high public debt. The pandemic has exacerbated this challenge, with a further rise in debt-to-GDP ratios posing both short-term challenges and the question of how Africa should best use debt to realize its long-term potential.

Economist Gregory Smith’s new book describes an approach he calls “purpose-built borrowing” that involves linking government borrowing to clear development strategies, better coordination among public creditors, more responsible actions, and more. “Virtuous” from private creditors and flexibility from “arbitrators and architects”. Of the international system.

Smith provides a wealth of information on Africa’s public debt landscape, the problems associated with high debt, and proposals for avoiding or resolving debt crises and getting the most out of debt while minimizing debt. risks. The “country stories” in each chapter deal with the situation of particular African countries.

Africa’s debt has increased since 2010 after significant reductions thanks to initiatives by heavily indebted poor countries and multilateral debt relief as well as agreements with public and private creditors. This recent debt is less concessional and more commercial than before and involves various lenders, including China, African regional institutions and others. In addition to raising commercial bank loans, countries are increasingly able to access global financial markets and issue Eurobonds, which help finance their budgets in the face of declining foreign aid and provide a signal to attract further capital flows, but also involve new risks.

Smith devotes a chapter to China’s loans to Africa, highlighting the scale, terms, nature, purposes and risks of these loans and discusses debt relief from China to African countries over the decades.

Debt relief from the international community to Africa during the debt crises of the 1980s and 1990s was insufficient, according to Smith, in part because of gaps in understanding the amount of debt. He criticizes the adjustment programs supported by multilateral institutions during this period but does not fully develop the idea. Going forward, the main message is to aim for an “evolution, not a revolution” of the international debt relief system, as the G20 Common Framework and other efforts attempt to do.

Borrowers, creditors, savers, and arbitrators and architects of the international system should take steps to “borrow better”, which would aid the development of countries while minimizing the risk of crisis. Smith says to borrow prudently, use debt for productive investments, conduct active debt management, increase debt transparency, deepen domestic markets and provide more flexible external financing – recommendations that will resonate with readers, who would also have appreciated information on how to reach them. .

Aim for an evolution, not a revolution, of the international debt relief system.

The book’s sensible approach and engaging style appeals to the reader who, nonetheless, might benefit from operational definitions of terms such as “calmer” capital, “smarter” investing, and “good” policies. Some readers of the IMF may shrink from the use of “bailouts” to refer to IMF programs. But these are details.

Overall, the book is a valuable addition to the literature and well worth reading for those interested in African debt issues.


VIVEK ARORA, Deputy Director, IMF Africa Department.

The opinions expressed in articles and other materials are those of the authors; they do not necessarily represent the views of the IMF and its Executive Board, or the policy of the IMF.

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