IMF’s Abebe Aemro Selassie on investment and sustainable debt management in Africa

In a recent interview with CNBC Africa, Abebe Aemro Selassie, the Director of the African Department at the International Monetary Fund (IMF), delved into the critical topics of investment and sustainable debt management in Africa. The conversation shed light on the various challenges and opportunities that African countries face in fostering economic growth and managing their debt levels effectively. One of the key points highlighted by Selassie was the importance of diversification in the economic strategies of African nations. Countries like Rwanda, facing geographical challenges as a landlocked nation, are shifting their focus towards becoming technology hubs and investing in high value-added production sectors like computer software. By diversifying their economies and moving away from traditional sectors such as agriculture, countries can stimulate growth and create new job opportunities. Selassie also emphasized the significance of sectors like tourism and aviation in driving economic development and reducing dependency on commodity exports. Another pressing issue discussed in the interview was the rising debt levels in many African countries. Selassie acknowledged that debt distress has become a concern for several nations, particularly those heavily reliant on hard commodity exports like oil. Countries such as the Republic of Congo and Chad have seen their debt levels soar to unsustainable levels due to the impact of commodity price crashes. However, Selassie noted that debt levels vary across the region, with some countries leveraging borrowing as a strategy to address infrastructure gaps and invest in key sectors like health and education. Furthermore, the interview touched upon the importance of revenue generation and fiscal policies in managing debt effectively. Selassie stressed the need for African governments to collect returns on their investments through efficient tax systems to service their debts. He cited examples where countries struggled to adjust utility tariffs to reflect the true cost of investments, leading to fiscal imbalances and challenges in sustaining infrastructure development. Selassie also addressed the issue of countries borrowing against anticipated commodity prices and the importance of fiscal reforms and diversification strategies to mitigate risks associated with volatile commodity markets. Overall, Selassie's insights underscored the complexities of debt management and economic growth in Africa. While some countries face significant challenges due to commodity price fluctuations, others are taking proactive steps to diversify their economies and strengthen their financial systems. The interview highlighted the need for tailored approaches to debt management based on each country's unique circumstances and emphasized the importance of sustainable investment practices in driving long-term economic prosperity in Africa.