Abstract
This paper reviews the role of external financing in development in sub-Saharan Africa, paying particular attention to the structural constraints which economies in the region face. The central role of external finance is identified as relieving the foreign exchange constraints to production and investment. The review of the trends shows that net foreign resource transfers into Africa have declined steeply in the last 12 years relative to GDP. A rapid rise in the debt servicing burden from the very large debt overhang is the key explanation. Losses from the deterioration of the external terms of trade further compounded the problem. The paper recommends action in four areas: the write-down of the debt stock to provide relief to the future servicing burden; diversification from debt instruments to foreign direct investment; enhancing effectiveness in the utilization and disbursement of official development assistance; and the provision of timely official credit to help ride out temporary shocks.
I wish to acknowledge the very competent assistance of Aida Kimemia of AERC in pulling together and organizing the large amount of data used in this paper.
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© 1996 UNCTAD
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Ndulu, B.J. (1996). Foreign Resource Flows and Financing of Development in Sub-Saharan Africa. In: Helleiner, G.K. (eds) The International Monetary and Financial System. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-24414-0_6
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DOI: https://doi.org/10.1007/978-1-349-24414-0_6
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