Better Borrowing

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Title: Better Borrowing
Review by: VIVEK ARORA
Publication: F&D Magazine
Date: December 2021
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Reviewed book: Where Credit Is Due: How Africa’s Debt Can Be a Benefit, Not a Burden
Author of book: Gregory Smith
Publisher details: Hurst Publishers, London, UK, 2021, 240 pp., $34.95

Gregory Smith proposes an approach called “borrowing with purpose” that links public borrowing with clear development strategies.
Emphasis on better coordination among official creditors, more responsible actions by private creditors, and flexibility by the “umpires and architects” of the international system.
The book presents “country stories” in each chapter discussing particular African countries.

Africa’s debt has risen since 2010 after significant reductions through the Heavily Indebted Poor Country and the Multilateral Debt Relief initiatives as well as workouts with official and private creditors.
Recent debt is characterized as less concessional and more commercial, involving diverse lenders including China and Africa’s regional institutions.
Countries increasingly issue Eurobonds and access global financial markets, which:
- Help finance budgets amid declining foreign aid.
- Provide a signal for attracting other capital flows.
- Carry new risks.

Smith devotes a chapter to China’s lending to Africa, covering:
- Scale, terms, nature, purposes, and risks of China’s lending.
- China’s debt relief to African countries over the decades.

The international community’s debt relief to Africa during the debt crises of the 1980s and 1990s was, Smith argues, insufficient.
Smith attributes part of that insufficiency to gaps in understanding how much debt is too much.
He criticizes adjustment programs supported by multilateral institutions during that period but does not fully develop this critique.
Looking ahead, Smith’s main message is to aim for an “evolution, not a revolution” of the international system for debt workouts, referencing efforts such as the G20 Common Framework.

Borrow prudently.
Use debt for productive investment.
Conduct active debt management.
Increase debt transparency.
Deepen domestic markets.
Provide more flexible external financing.
Improve coordination among creditors and encourage more virtuous behavior by private creditors.
Link public borrowing with clear development strategies.

The reviewer notes the book’s commonsense approach and engaging style but suggests:
- Operational definitions could help for terms such as “calmer” capital, “smarter” investment, and policies that are “fine.”
- Some IMF readers may react to the use of “bailouts” to refer to Fund programs.
- The critique of past multilateral adjustment programs is not fully developed.

The reviewer characterizes the book as a valuable addition to the literature and “well worth reading” for those interested in African debt issues.
Reviewer’s affiliation: VIVEK ARORA is a deputy director in the IMF’s Middle East and Central Asia Department.

F&D Magazine — Better Borrowing — VIVEK ARORA — December 2021

استعراض الكتب
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Better Borrowing
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Críticas de libros ● Finanzas y Desarrollo ● Diciembre de 2021
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Where Credit Is Due: How Africa’s Debt Can Be a Benefit, Not a Burden
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