Technological innovation and changes in economic systems throughout the world have resulted in debt becoming a staple of economic life at nearly every level of the world's economies. Individual debt in the United States, for example, has reached levels which cause concern among some analysts. Companies regularly weigh the advantages of financing through debt or equity issues. Entire countries take on debt to finance infrastructure growth, or merely to meet more fundamental obligations. Whether experienced at the macroeconomic level or microeconomic level, debt can carry with it considerable problems. Any borrower, whether an individual, company or nation, must repay not only the principal (the amount borrowed), but also the interest that accrues. In some debt situations, the borrower is able to repay only the interest, resulting in additional debt being taken on to cover the principal when it comes due. The result can be that the borrower is unable to make economic headway as the debt burden becomes increasingly larger. This research considers the debt situation in Africa, solutions which have been put forth for the problem, and the political ramifications of the situation.
According to the International Monetary Fund (IMF), Africa is the most indebted of any developing region, with an estimated debt to gross domestic product (GDP) ratio of 72 percent in 1999. This compares to a debt to GDP ratio of 40 percent for Latin America during the same period ("Debt Trends," 1999, p. 110). Such a high ratio of debt to GDP means that the nations within Africa are spending a considerable percentage of their resources on debt repayment and servicing, which lowers the amount that the countries are able to invest in long-term infrastructure improvements or other projects. The end result, according to some, is that the countries are in a cycle of debt servicing from which it will be difficult, if not impossible, to recover.
In mid-19...