Debt crisis warning as TIFI Committee meets
JOHANNESBURG, SOUTH AFRICA – The Standing Committee on Trade, Industry, Finance and Investment (TIFI) of the SADC Parliamentary Forum has emphasized the importance of addressing the issue of debt ceiling in SADC member states.
The committee met under the theme “Debt Ceiling in SADC Member States,” to discuss the impact of trade, industry, finance, and investment on the growth and development of countries within the African continent.
Honourable Dithapelo Keorapetse from Botswana, chaired the meeting. He highlighted the crucial role that trade and investment play in the economic development of nations and stressed the need for collaborative efforts to foster economic growth.
Specifically, the focus of the meeting was on debt ceiling and its implications for SADC member states. Keorapetse acknowledged that nations require financial support to sustain their operations and pay off debts. However, the key responsibility of parliaments and parliamentarians is to exercise oversight and ensure that borrowing remains within reasonable limits to avoid excessive debt and potential financial crises.
To shed light on the subject, the meeting featured economist Mr. Pepukai Chivore, who has worked closely with the SADC Parliamentary Forum in the past, as well as Mr Simon Mtambo, Deputy Director of the Parliamentary Budget Office at the National Assembly of Zambia.
These experts shared insights and perspectives on the latest trends and developments in trade, industry, finance, and investment. Their presentations aimed to guide parliamentarians in effectively engaging with the executive branch to ensure responsible government borrowing and funding practices.
Keorapetse drew attention to Annex 2 of the SADC Protocol on Finance and Investment, which recognizes the significance of macroeconomic stability for economic growth in Southern Africa. The Annex encourages member states to adopt policies that foster stability, particularly by avoiding an increase in public debt-to-GDP ratios. It further advises member states to maintain a public debt-to-GDP ratio of no greater than 60% to achieve macroeconomic convergence targets.
However, Keorapetse expressed concern about the alarming rise in public debt within the SADC region, with the average debt-to-GDP ratio nearing the 60% benchmark for most African countries since 2019. The Covid-19 pandemic and unforeseen expenditures have contributed to this increase in public debt.
He emphasized the need for heightened vigilance to ensure active participation in regional development and the growth of economies.
The recent experiences, including the Covid-19 pandemic and the disruption in oil market prices due to the conflict in Ukraine, have highlighted the urgent requirement for SADC countries to transform economic strategies and seek sustainable solutions to withstand adverse shocks.
Keorapetse stressed the importance of averting the temptation to borrow excessively and instead explore internal solutions to minimize the economic costs associated with crises.
In light of these challenges, Keorapetse called for a comprehensive review of the current debt situation in the region. The goal is to protect the standard of living for citizens in the SADC region by mitigating the adverse repercussions of increasing public debt.
He stressed the need for clear laws, regulations, and policies that define sustainable limits for external public debt, considering a country’s production potential measured by GDP and exports. By expanding production potential, countries can empower themselves to repay the debts they have incurred.
The rising stock of public debt Covid-19 pandemic has further exacerbated this issue, necessitating a closer examination by Parliamentarians to safeguard the region’s developmental trajectory.
Therefore, the committee emphasized the need for clear laws, regulations, and policies that establish sustainable limits on external public debt.
During his presentation on “Debt Ceiling in SADC member states,” Chivore stressed the importance of maintaining a fundamentally sustainable level of public debt. He advocated for debt limits linked to a country’s GDP and exports, emphasizing the need for laws that secure Parliamentary control over debt and enhance transparency in financial management.
Citing case studies such as the United States, Kenya, and Denmark, Chivore underscored the significance of balancing GDP and economic performance with the cost of borrowing.
Mtambo, in his presentation on “The Role of Parliament in Debt Management in Zambia,” outlined the Zambian government’s commitment to fiscal consolidation through increased revenues and reduced expenditures.
He emphasized the Constitutional mandate of the National Assembly to approve the national budget and stressed the importance of transparency, accountability, and responsible use of public resources in maintaining sound fiscal discipline. Mtambo highlighted the need for Zambia to address its widening fiscal deficit and unsustainable debt stock.
Following extensive deliberations, the committee made a series of recommendations to the 53rd plenary assembly to address the challenges posed by escalating public debt.
These recommendations included strengthening external oversight through the establishment of independent government bodies like Public Debt Management Offices, cooperating with government agencies, publishing yearly compliance reports, and leveraging reports by Civil Society Organizations (CSOs) and think tanks.
The committee also urged the executive to report regularly on the debt-to-GDP limit, promoting transparency and efficient allocation of limited resources. Uniformity in the legal framework for public financial management was encouraged, along with the adoption of budget-making legislatures that possess the capacity to amend or reject budget proposals.
It further emphasized the need for research on countries that have successfully maintained low debt-to-GDP ratios, as well as prudent use of natural resources and stringent provisions in agreements related to mineral resource exploration.
Parliamentarians were called upon to scrutinize borrowing for consumptive purposes, combat corruption, and ensure accountability even with changes in executive management. The recommendations aimed to instil fiscal discipline, safeguard the region’s economy, and promote sustainable debt management practices.
The 53rd plenary assembly will now consider these recommendations, with the hope that member states will actively work towards implementing measures that promote financial stability, responsible borrowing, and equitable development in the SADC Region.