Economy

IMF Deputy Division Chief worried over huge portions of Eurobonds used to service debts

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The Deputy Division Chief of Regional Studies in the African Department at the International Monetary Fund, Wenjie Chen, has advised Sub-Saharan African countries, including Ghana, to allocate borrowed funds into productive sectors of the economy that generate returns.

According to her, if borrowed funds are invested in areas such as infrastructure, health, and education, it would yield high returns for the country, which is a reassuring factor.

“For instance, if they [Sub-Saharan African countries] were to put the money into infrastructure spending, to social spending, health, education, that then, will reap the benefits for the country. And by that I mean, for instance, in terms of economic activity that it can stimulate, which then, in return, will generate a larger tax return for the economy. Those funds, in turn, can repay the debt, and then put into other investments that, in return, yield more growth”, she disclosed in an interview.

She expressed concern that a considerable portion of borrowed funds, including Eurobonds, is being utilized for debt repayment. 

“And not all, but several countries are indeed facing rollover risks in terms of these large repayments that are coming up. Now, given the high borrowing costs and still elevated in the future to come that we see and the liquidity shortfalls”.

 She encouraged Sub-Saharan African countries to focus on raising funds domestically by improving domestic revenue mobilization.

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