Trade finance and development in Africa : Issues in debt management

Since the beginning of the 1980s, most African countries have been experiencing debt and debt-service difficulties. These difficulties are traceable in part, to the interrelations between Africa's trade and trade policies, the global financial environment and Africa's policies as they relate to the management of the debt crisis which arose therefrom. It is the contention of the paper for example, that the accumulation and recycling of the resulting petrodollars and the recession of the early 80s - all combined to create the necessity foreign borrowing. The slower growth in world trade during the 1981-89 period relative to that of 1971-80, and the associated decline in demand for primary products (Africa's main exports), generated balance of payments difficulties and the ultimate recourse to foreign borrowing. Finally, the pursuit by most African countries of inappropriate domestic policies, in particular inward-oriented trade policies and policies which tax exports (e.g. overvaluation of national currencies), also contributed to loss of market share and the consequent decline in export revenue. The paper argued that in principle external finance is desirable as a supplement to domestic resources. What is not desirable is poor management of external finance. The paper then highlighted the critical issues in external finance management - the use to which external finance is put;a country's debt;the pursuit of growth-oriented policies and a satisfactory system of monitoring, registering and approving external borrowing.