Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead

The increased access of African countries to international capital markets has put public debt sustainability at the forefront of the continent's policy agenda. Utilising the ‘stabilising primary‐balance’ approach, this article finds that the actual primary balances exceeded those required to keep public debt at the 2007 level in about half the countries studied, and in several cases, those needed to reduce public debt‐to‐GDP to sustainable thresholds. The interest rate‐growth differential (IRGD) drove sustainability, underscoring the importance of growth and borrowing for growth‐enhancing outlays. As the IRGDs are likely to narrow over the longer term, fiscal policies will need to play a greater role.     

Linking Social Development with the Capacity to Carry Debt: Towards an MDG‐Consistent Debt‐Sustainability Concept

Owing to concerns among low‐income countries that the new debt sustainability framework of the Bretton Woods institutions may lock them into a so‐called ‘low debt‐low growth’ scenario, the United Nations has called for a more MDG‐consistent debt‐sustainability concept. This article shows that there is a robust relationship between achieving the Millennium Development Goals and having a higher capacity to carry debt. It then discusses options for modifying the current debt‐sustainability framework, and suggests that including progress made in achieving the MDGs in determining borrowing limits would be a first step towards adopting such a concept.     

The Revival of Non‐Traditional State Actors' Interests in Africa: Does it Matter for Policy Autonomy?

Africa's external relations are currently undergoing major changes. Non‐traditional state actors like China and India are reviving their ties with African economies and thereby affecting power relations between African states and traditional partners. Meanwhile, high commodity prices and improved credit ratings make external finance available for African governments. This article examines how non‐traditional state actors affect the possibility of African governments setting and funding their own development priorities. It argues that while the current situation may increase the policy autonomy for African economies this is largely a consequence of the increased availability of external finance – and not just from non‐traditional state actors.     

BOON OR BURDEN? THE EFFECT OF PRIVATE SECTOR DEBT ON THE RISK OF SOVEREIGN DEFAULT IN DEVELOPING COUNTRIES

We explore how the share of the private sector in total external debt affects perceived creditworthiness and the likelihood of sovereign default in developing countries. While there are theoretical arguments both in favor and against a stabilizing role of private‐sector borrowing, the evidence supports the notion that a greater share of the private sector in total external debt is associated with a reduced likelihood of sovereign default. (JEL F34, O16)     

FISCAL RULES AND GOVERNMENT BORROWING COSTS: INTERNATIONAL EVIDENCE

We find that the adoption of numerical fiscal rules reduces government borrowing costs in a sample of 101 advanced and developing countries for 1985–2010. We apply a variety of propensity score matching methods to address the self‐selection problem of policy adoption and find strong evidence that fiscal rules have large and significant treatment effects on lowering government borrowing costs in both international and domestic financial markets. The results are robust to changes in country sample and alternative estimation methodology, and are consistent with fiscal rules helping to build policy credibility by reducing the probability of default and the “risk premium” on government debt that compensates lenders for this possibility. (JEL E43, G12, H60)     

How well is debt managed by nonprofits?

Little is known about why nonprofits accrue debt, how much they owe, and whether the funds they borrow are used productively. This article distinguishes between productive, problematic, and deferred debt. Employing a data base representative of 114,726 tax-filing charitable nonprofits in the United States in 1986, it examines the pervasiveness of nonprofit debt and the relation between this debt and nonprofit financial health. The analysis finds that over 70 percent of the nonprofits hold debt, the distribution of this debt is highly concentrated, and the level of debt and leverage varies with asset size and type of activity. Nonprofits with higher leverage and absolute debt levels are financially healthier than those with lower levels. While the analysis does not determine whether financially stronger nonprofits are better able to borrow, the results support the view that borrowing in the nonprofit sector is economically efficient.     

Debt and the Built Urban Environment: Examining the Growth of Urban Slums in the Less Developed Countries, 1990–2010

The present study examines the influence of external debt on the change in the proportion of the total population living in urban slum conditions in the less developed countries between 1990 and 2010, drawing from a political economy of the world-system theoretical perspective. Ordinary least squares panel regression illustrates external debt as a percent of gross national income has a statistically significant positive effect producing higher levels of urban slum growth. This result is recurrent across all developing countries but is particularly strong among sub-Saharan African nations. Further, urban population growth 1960–1990 exhibits a positive effect contributing to higher urban slum growth. The results support the hypothesis that external debt burden is an important factor contributing to higher levels of urban slum growth in the less developed countries between 1990 and 2010. This effect, moreover, is particularly strong among sub-Saharan African countries relative to developing countries within other regions of the world.     

Assessing international organizations’ support to social enterprise

This article takes stock of a sample of interventions and programmes across different countries and regions supported by international organizations to foster the development of social enterprise. The primary objective of the article is to generate a compilation of such interventions and draw some lessons about their potential contribution to the growth and sustainability of the sector. The results indicate that international organizations’ support to social enterprise has focused primarily on the provision of financial resources, notably loans and grants. While programmes remain largely unassessed, the few available rigorous evaluations show that social enterprise has the potential to be a cost‐effective mechanism to deliver basic social services to the poor. The article proposes a set of policy recommendations directed primarily to international organizations and the public administration to improve and enhance their support to the sector.     

CHANGING CONCEPTIONS OF LEISURE AMONG THE JEWS OF WESTERN BELARUS AT THE END OF THE 19TH CENTURY

The article examines the adverse conditions in which the Joint Distribution Committee (JDC) started its war relief work in German‐occupied Lithuania in 1915. As Lithuania's fate was still uncertain, the JDC had to overcome almost insurmountable diplomatic, political and practical problems in the initial stages of its activity. The article highlights how the JDC was able to adopt a consistent policy, always subscribing to a non‐political approach and adapting its tasks to the immediate and most pressing need of the countries aided, while having to deal with significant political challenges that deeply affected its freedom of movement, such as the impossibility of acting without the State Department's approval and of ignoring the reality of the German military administration.     

Aid and Fiscal Deficits: Lessons from Uganda on the Implications for Macroeconomic Management and Fiscal Sustainability

This article contributes to the ongoing debate on the macroeconomic management of large aid inflows to low‐income countries by analysing lessons drawn from Uganda, where the fiscal deficit before grants, which was largely aid‐funded, doubled to over 12% of GDP in the early 2000s. It focuses on the implications of the widening fiscal deficit for monetary policy, the real exchange rate, debt sustainability and the vulnerability of the budget to fiscal shocks, and argues that large fiscal deficits, even when funded predominantly by aid, risk undermining macroeconomic objectives and long‐run fiscal sustainability.     

Remittances,Institutions and Growth in Africa

Remittances have become an important source of external finance in many developing countries. This article examines the relationship between remittances, institutions and economic growth in a panel of 26 African countries over the period 1980–2014. We apply the fixed effects (FE) and the two‐step system generalized method‐of‐moments (GMM) estimation methods. Our results show that there is a positive relationship between remittances and growth. We also find that institutions are an important determinant of economic growth. The interaction terms have a positive and statistically significant effect on economic growth. Thus, the growth effect of remittances is enhanced in the presence of strong institutions. Strong institutions are therefore germane in attracting greater remittance inflows to African countries. A clearer understanding of the channels through which remittance flows will enhance growth in African economies may assist policymakers to craft appropriate policies. In particular, a policy environment that promotes strong institutions would serve to attract more remittances.     

Ignoring the elephant in the room? Assessing the impact of the European Union on the Development Assistance Committee's role in international development

This article studies the impact of the European Union (EU) on the Development Assistance Committee (DAC) of the Organisation for Economic Co‐operation and Development (OECD). While the literature thus far has focused on the external challenges for the DAC's role in international development, this study argues that the EU should be taken into account as well. By focusing on the cases of policy coherence for development and the concessionality of official development assistance (ODA) loans, we show that the EU poses a structural challenge for the DAC's role in international development given the strong overlap in membership between both institutions and the Union's changing nature as a development actor.     

The Prospects for Foreign Debt Sustainability in Post‐Completion‐Point Countries: Implications of the HIPC‐MDRI Framework

The Enhanced HIPC Initiative was launched in 1999 to reduce the Net Present Value (NPV) of foreign debt of the world's poorest countries to a sustainable threshold of 150% of their exports. This article applies a simple growth‐with‐debt model to 16 post‐completion‐point HIPCs to assess whether this goal will be met by 2015. Its somewhat optimistic base‐case projections suggest that participation in the current Enhanced HIPC‐MDRI initiative will only reduce the NPV of their total external debt to 176% of exports by this date. Sensitivity tests which expose these countries to adverse exogenous shocks help draw attention to policies that could ensure that they do not again accumulate unsustainable debt levels.     

The Price of Opportunity: Race,Student Loan Debt,and College Achievement

This paper examines racial differences in student loan debt and concurrently assesses the potential payoffs and countervailing risks inherent in reliance on loans in a cohort of black and white first‐year college students. Using the 1996–2001 Beginning Postsecondary Student study we find that the use of loans results in greater enrollment persistence and higher odds of college completion, especially for black students. However, black students acquire larger amounts of student loan debt and face a higher risk of default than white students. This is in part due to associated racial differences in family socioeconomic status and type of institution attended. We suggest these findings illuminate the dual‐sided nature of college loans that makes them an imperfect, but overall positive, tool for reducing educational inequality. On the one hand, student loans reduce educational inequality that otherwise results from disadvantaged students' struggles to pay for college and complete college in a timely fashion. At the same time, the degree to which loans reduce racial inequality is diminished by black students' higher loan amounts, the large number of black students who borrow but do not finish college, and the large racial difference in the odds of defaulting on a loan.     

Beyond "banking for the poor": credit mechanisms and women's empowerment

This article describes some strengths and limitations of credit programs for women in developing countries. It is urged that development planners recognize the importance of the selection of the type of credit mechanism in the long term. Ethical issues should be decided upon before the credit mechanism is operable. Organizations should make clear what level of commitment there is to empower borrowers. Most organizations give loans to women and assume empowerment will take place without devising strategies to ensure empowerment. Credit mechanisms include credit for the poor and credit by the poor. A sound financial portfolio and 100% repayment are not the appropriate criteria for securing the empowerment of women. Empowerment of women is related to "building the capacity of borrowers to manage and control decision making." UNICEF's framework of gender equality and women's empowerment identifies levels of empowerment as "welfare, access, conscientisation, participation, and control." Development planners should be aware that provision of credit also has the potential to increase a poor family's debt. Delinquency may be hidden by overlapping loans that trap borrowers. Fewer installment payments increase the chances of a debt trap. Reducing the number of installments may reduce administrative costs and conform to production processes, but may also lead to a debt trap. There is now considerable emphasis on investing in low-income women entrepreneurs as a highly efficient means of achieving social and economic objectives. Credit programs aim to support the growth of small, self-sustaining businesses, to improve women's opportunities, and to provide alternatives to exploitation by local money-lenders. This article describes the following credit mechanisms: bank guarantee systems, government credit schemes, intermediary projects, direct lending projects, banks for the poor, credit unions, and village-based banks.     

An Exploratory Study of Chinese Americans’ Debt Ownership

Research concerning the financial well-being of Chinese American households is extremely limited. This article examines factors that affect the probability that Chinese American households will hold debt. Analysis of data from a survey of Chinese Americans in five Midwestern states in the U.S. indicated that 80.5% of the sample households held some type of debt. Factors associated with the probability that a Chinese American household would be a debtor included age, presence of children under 18, health, annual income, and amount of financial and non-financial assets.     

The livelihood challenges of resettled communities of the Bui dam project in Ghana and the role of Chinese dam‐builders

Emerging issues from the Bui hydropower project suggest that the experiences of two earlier hydropower projects in Ghana failed to prevent challenges related to resource access and livelihoods. This article examines the nature of the challenges, their causes, why they were not avoided and the role of the Chinese builders. We conducted 43 interviews and 11 focus group discussions and analyzed qualitative data by themes using narrative analysis. Our findings show that the livelihoods of the resettled communities are, on balance, negatively impacted by the construction of the dam. While Chinese dam‐builders played a major role in financing and enabling the dam's construction, the Ghanaian governance arrangements were found to be more important in addressing the livelihood challenges.     

Over‐indebtedness and microcredit in Cambodia: Moving beyond borrower‐centric frames

Over the past two decades, Cambodia has experienced an unprecedented credit boom, a growth in lending so rapid that the International Monetary Fund (IMF) referred to it as “one of the fastest financial deepening episodes by historical cross‐cultural standards” (IMF, 2016, p. 4). This deepening has been driven by the expansion of microcredit. In tandem, over‐indebtedness has increased among microcredit borrowers, and debt has become a significant political and economic concern. This article explores how over‐indebtedness is understood and explained by stakeholders across microcredit value chains. To do so, we draw on interviews with microfinance institution (MFI) executives, investors, branch managers, partners, financial literacy trainers, loan officers and borrowers in Siem Reap and Phnom Penh. We find that across the sector, dominant framings of over‐indebtedness privilege borrower‐centric explanations, while discounting the structural drivers of excessive lending and borrowing. As a consequence, current efforts to limit over‐indebtedness are unlikely to produce the kinds of solutions that are most needed to reduce the debt stress among borrowers. These arguments have implications across the Global South, particularly for contexts where microfinance is rapidly expanding.     

INFORMATION,INSTITUTIONS, AND BANKING SECTOR DEVELOPMENT IN WEST AFRICA

Using a new West African panel data set, we provide evidence on the determinants of individual banks' loans and assets in some of the poorest countries in the world. Higher loan default rates reduce both the loans to assets ratio and the volume of assets. However, the size of these effects is sensitive to bank age and ownership structure. Younger, private, domestically owned banks are most affected, suggesting that such banks face the most severe informational disadvantages. Very old government‐owned banks benefit from high default rates. We also explore how the quality of governance impacts on loans and assets. (JEL G21, O16)     

A complex solution to a complicated problem? Early messages from the national evaluation of the Children's Fund Prevention Programme

This paper is concerned with exploring the research and policy base that underpinned the development of the Children's Fund Prevention Programme. It discusses how the initiative developed, how it is being evaluated and how it is now contributing to the new policy agenda around prevention services. Early findings are discussed highlighting some of the challenges local projects have to manage around partnership working, participation of children and young people in the programme, and the embedding of prevention strategies in local practice. Finally the conclusion sets the Children's Fund in forthcoming central government policy activity and examines how the evaluation can best inform the development of collaborative preventative services to children and their families.