United Nations

A/51/228/Add.1


General Assembly

Distr. GENERAL  

29 July 1996

ORIGINAL:
ENGLISH


                                                              

General Assembly
Fifty-first session
Item 44 of the provisional agenda*

     * A/51/150.


             IMPLEMENTATION OF THE UNITED NATIONS NEW AGENDA FOR THE
                      DEVELOPMENT OF AFRICA IN THE 1990s

                        Report of the Secretary-General

                                   Addendum


                 Estimates of projected resource requirements


                                     SUMMARY

     The present document was prepared by the Economic Commission for
Africa pursuant to General Assembly resolution 50/160 A of
22 December 1995 and contains estimates of the projected resource
requirements from all sources needed for the full implementation of
the New Agenda and the assessment of the actual mobilization of
resources for the period 1992-1995.


                                   CONTENTS

                                                              Paragraphs Page

 I.   INTRODUCTION .........................................    1 - 4     3

II.   FINANCIAL RESOURCES REQUIRED FOR THE IMPLEMENTATION OF
      THE NEW AGENDA .......................................    5 - 11    3

      A. Domestic resources ...............................     5 - 7     3

      B. Addressing the debt overhang .....................       8       4

      C. Foreign aid ......................................     9 - 11    4

III.  ASSESSMENT OF THE ACTUAL MOBILIZATION OF FINANCIAL
      RESOURCES UNDER THE IMPLEMENTATION OF THE NEW
      AGENDA OVER THE PERIOD 1992-1995 .....................   12 - 48    5

      A. Generation and mobilization of domestic financial
         resources ........................................    12 - 18    5

      B. Trend of foreign direct investment in the region .    19 - 24    8

      C. Debt structure and treatment .....................    25 - 37   10

      D. Development of official development assistance ...    38 - 48   15

IV.   CONCLUDING REMARKS ...................................   49 - 53   18


                               I.  INTRODUCTION


1.   In the early 1990s, the majority of African countries continued to
suffer from structural weaknesses and the region's economic crisis was
not being alleviated.  Far from improving the socio-economic
conditions and overall living standards of Africans, the situation
deteriorated.  To address this bleak outlook, the General Assembly, in
its resolution 46/151 of 18 December 1991, adopted the United Nations
New Agenda for the Development of Africa in the 1990s.

2.   The New Agenda set some desirable targets, the attainment of which
was founded on the principles of shared responsibility and global
partnership between Africa and the international community at large,
including:

     (a)  A gross national product growth rate, in real terms, of at
least 6 per cent a year, so as to double the average income per person
in African countries and to impart an economic dynamism to poverty
reduction over the next 20 to 25 years;

     (b)  A level of official development assistance of US$ 30 billion
in 1992, increasing by 4 per cent a year on average over the entire
programme period; 

     (c)  Debt-servicing payments that do not exceed $9 billion
annually (in 1992 dollars).

3.   The figures suggested by previous studies of the African
Development Bank (ADB), the World Bank and the Economic Commission for
Africa (ECA) on external resource requirements for African economic
recovery up to the year 2000 ranged from $50 billion to 60 billion
annually (in 1992 dollars), including official development assistance
inflows, loans, foreign direct investment, and debt alleviation and
cancellation arrangements.

4.   At the mid-point of the implementation of the New Agenda, it would
be difficult to state precisely the degree to which the various set
objectives have been met.  None the less, a comparative analysis of
the financial commitments entered into, against resources actually
mobilized over the period 1992-1995, may provide insights into the
level of involvement and investment by African countries and the
international community in the quest for economic recovery and
sustainable development. 


            II.  FINANCIAL RESOURCES REQUIRED FOR THE IMPLEMENTATION
                 OF THE NEW AGENDA

                             A.  Domestic resources

5.   African countries have encountered a number of difficulties over
the past decade in their efforts to mobilize and deploy financial
resources for economic development.  Mainly because of the prevailing
low rates of both public and private saving, lack of competitivity in
international trade and some ill-adapted economic policies, African
countries did not succeed in mobilizing the aggregated $82.5 billion
that were to come from Member States to support the implementation of
the United Nations Programme of Action for African Economic Recovery
and Development over the period from 1986 to 1991.

6.   To address these constraints, African countries have committed
themselves to implementing various measures within the context of
medium- to long-term development strategies and policies.  Measures
taken to raise the level of savings include:  (a) providing positive
interest rates and better stabilization policies; (b) tighter public
expenditure control mechanisms to promote public-sector savings; (c)
development of long-term, high-interest savings schemes; and (d) more
efficient deposit systems and structures, restructuring the main
banking systems as well as encouraging the increased use of "tontine"
schemes (savings mechanisms, in use in certain countries, that operate
outside the mainstream banking and financial system).

7.   To curb erratic fluctuations in export commodity prices and
improve international market conditions for export commodities,
proposed policy measures focused on:  (a) commodity diversification;
(b) enhancing intra-African trade; (c) pursuing existing export
revenue stabilization mechanisms, such as the System of Stabilization
of Export Earnings (STABEX) and the System for Stabilizing Export
Earnings in the Mining Sector (SYSMIN) schemes under the Convention
between the European Community and the African, Caribbean and Pacific
States, and the Compensatory Financing Facility (CFF) sponsored by the
International Monetary Fund (IMF).


                       B.  Addressing the debt overhang

8.   There is a strong conviction on the part of policy makers in
Africa and the international community as a whole as to the urgency of
the need for more imaginative strategies to scale down the continent's
debt burden to manageable levels.  Therefore, in accordance with the
measures suggested in the New Agenda,  efforts should be stepped up
and refined to keep the levels of debt service payments within
reasonable limits, i.e., a ceiling for the region, set at $9 billion
annually.  


                                C.  Foreign aid

9.   The international community has recognized that African countries
are in transition and has committed itself to lending support to that
process.  International support in the pursuit of the objectives of
the New Agenda reflects that commitment.  However, given the budgetary
constraints facing some of the developed countries, the clarification
of foreign aid objectives, the new conditionalities governing the
granting of assistance, the difficulties facing the donor countries of
the Organization of Petroleum Exporting Countries (OPEC), the
dismemberment of the Economic and Monetary Assistance Committee and
the heightened competition among various regions for aid packages, the
prospects for achieving the objective of $30 billion in official
development assistance flows to Africa beginning from 1992, and an
annual growth rate of official development assistance flows of 4 per
cent, constitute a formidable challenge.

10.  Multilateral aid, which mainly comes from funds and contributions
managed by international and regional cooperation and development
agencies, is essentially provided by the European Development Fund
(EDF), ADB, the United Nations system and the Bretton Woods
institutions.  The latter have fully supported the principles
enunciated by the Development Assistance Committee (DAC) and, in
addition, have emphasized the need to scale back the role of the
State, particularly in public enterprise and public-sector
participation in virtually all sectors of the economies concerned
(foreign exchange transactions, education, urban development,
infrastructures and other socio-economic areas) and to give freer rein
to market forces in order to achieve economic growth.

11.  The ADB group, in its operational programme for the 1990s,
released in 1991, outlined its programme of action for boosting
economic growth and sustainable development in Africa.  On the basis
of a projected funds outlay of $3 billion per year, on average,
throughout the 1990s, it sought to give attention to programmes and
projects that contribute to poverty reduction, and to human resource
development through investment in rural economic development,
education and health.  In addition, it reflected a major commitment to
private-sector development and regional economic integration.


            III.  ASSESSMENT OF THE ACTUAL MOBILIZATION OF FINANCIAL
                  RESOURCES UNDER THE IMPLEMENTATION OF THE NEW
                  AGENDA OVER THE PERIOD 1992-1995

        A.  Generation and mobilization of domestic financial resources

12.  Africa has shown signs of recovery over the past two years but
growth has obviously been checked by the lack of a stable enabling
environment for implementing economic policies, and also by the high
inflation and acute budget deficit which ate up an excessive share of
available national savings, reducing the resources available for
investment.  The savings trend and investment rates, as shown by the
results of the economic reform policies undertaken by African
countries, was relatively stable over the period 1990-1995 (see table
1).

13.  The savings rate fell from 19.0 per cent of the gross domestic
product in 1991 to 18.1 per cent in 1995.  Over the same period, the
investment rate rose from 21.2 to 22.4 per cent of the gross domestic
product.  Although the total investment reached $95 billion in 1990,
it still fell short of the 25 per cent rate, which is normally the
minimum level assumed to ensure Africa's economic growth and a steady
growth of the standard of living per capita.  This relative stability
reflects various changes in the resource mobilization and allocation
policies pursued by the public and private sectors in all sub-Saharan
countries and Communante' financie`re africaine zone countries.


           Table 1.  Origin and use of savings (as a percentage of the
                     gross domestic product)

----------------------------------------------------------------------
                        1990    1991    1992    1993    1994    1995
----------------------------------------------------------------------
World          
  Savings               23.0    22.6    22.0    22.0    22.9    23.4
  Investment            23.8    23.5    23.3    23.3    23.7    24.0

Developing countries
  Savings               25.3    24.4    25.1    25.8    27.4    27.9
  Investment            25.8    26.1    26.9    28.5    28.6    29.0

Africa         
  Savings               18.6    19.0    16.7    15.1    17.4    18.1
  Investment            19.3    21.2    20.9    19.6    21.1    22.4
----------------------------------------------------------------------
     Source:  IMF, World Economic Outlook, 1996.


14.  In the early 1990s, several African countries tried to control the
budget deficit in a stringent manner.  The deficit in sub-Saharan
Africa was thus reduced, on average, from 10.6 per cent of the gross
domestic product in 1989 to 6.5 per cent of the gross domestic product
in 1994. 1/  Contrary to economic development and recovery goals, the
reduction in the budget deficit was attained through drastic cuts in
the infrastructural budget which accounted for only 25 per cent of
public expenditure in 1994, as against 46 per cent of total public
expenditure in 1990.  The social sectors (health and education) also
experienced considerable cuts.  Despite the reduction of budget
deficits as a percentage of the gross domestic product, public savings
did not increase.  In fact, public savings fell rather sharply in
sub-Saharan countries from 2.6 per cent of the gross domestic product
at the end of 1990 to 1.2 per cent of the gross domestic product at
the end of 1993.

15.  The drop in public savings was offset by private savings, which
rose faster than the fall in public savings.  Investments were kept in
check (as a percentage of the gross domestic product) with the
introduction of the incentives system and by applying tax reforms
which provided for tax exemptions for the productive sectors and new
investments.  In 1992, Co^te d'Ivoire set up a tax system reform
programme to eliminate tax barriers to economic development. 
Botswana, Kenya, Mauritius and the United Republic of Tanzania started
applying financial reforms aimed at improving private sector financial
control and coordination, and stepping up and mobilizing domestic
savings. 2/

16.  Africa's poor financial sector did not make for the adequate
fulfilment of the crucial function of savings mobilization and
financial resource allocation.  A smoothly run financial sector can
help to bring about a more efficient allocation of real resources. 3/ 
The structure of the financial sector and financial laws prevailing in
several countries were reorganized and enhanced to build greater
investor confidence in the financial intermediation process.  Many
bank-specific reform programmes were embarked upon in several
countries.  The means used ranged from financial repression relief (by
aligning interest rates with market equilibrium levels and by cutting
back on selective credit policy programmes) to restructuring and
recapitalizing ailing institutions, boosting appropriate financial
infrastructures for the hinterland and creating new financial
instruments.

17.  In addition to savings, another source of domestic resources was
revenue from foreign trade.  Trends in international trade have become
very important to African countries.  It was quite disturbing to see
Africa being marginalized from the international trade arena.  In the
early 1990s, exports from Africa accounted for only 2 to 3 per cent of
the total volume of international trade.  With the exception of a few
oil-exporting countries, most African countries whose main exports
were agricultural produce and mineral resources experienced a serious
decline in their terms of trade.  Exports from Africa could not
penetrate potential markets owing to obstacles placed in their way. 
Many products suffered and continue to suffer the adverse effects of
industrialized countries' agricultural policies, which tend to depress
the world market prices of food products.

18.  The balance of trade plummeted from plus $4.2 billion in 1990 to
minus $8.2 billion in 1994 (table 2).  As spelled out in section I
above, the causes for the loss in resources experienced over the past
two years run counter to some of the commitments made under the New
Agenda.  This is because:

     (a)  African countries and developing countries as a whole still
find it difficult to control the prices of commodities;

     (b)  Despite efforts deployed to invest in the various price
stabilization mechanisms, including agreements to production quotas,
the terms of trade could not be kept from deteriorating;

     (c)  The quota system with regard to access to the industrialized
markets is still in place.


                 Table 2.  African trade indicators, 1990-1995

----------------------------------------------------------------------
                       1990    1991    1992    1993    1994    1995
----------------------------------------------------------------------
Terms of trade
index                  +7.3    -9.2    -4.1    -5.0    +0.5    +1.5

(1990 = 100)          100.0    90.8    87.1    82.7    83.0    86.0

Exports (US$ billions) 94.9    96.5    94.2    87.9    89.6    97.9

Imports (US$ billions) 90.7    91.7    96.5    93.5    97.8   108.9

Trade balance
 (US$ billions)         4.2     4.8    -2.3    -5.6    -8.2   -11.0
---------------------------------------------------------------------
     Source:  Socio-Economic Research and Planning Division, ECA.


            B.  Trend of foreign direct investment in the region 4/

19.  Foreign direct investment is an important development factor, in
that it is accompanied by the transfer of technologies and human
skills, which are not readily available in developing countries.  Over
the past 10 years, foreign direct investment flows soared worldwide,
except in Africa.

20.  Since the early 1990s, less than 2 per cent of total foreign
direct investment flows worldwide have come to Africa (see table 3). 
The level of flow has fluctuated around $3 billion yearly.  In
absolute terms, this volume is comparable to that of 1985, when the
economic crisis in Africa bottomed out.  Foreign direct investment
flows to Africa mainly concentrated on the petroleum industry which
had the highest rates of return, notwithstanding the political
instability, crisis and conflicts, in countries such as Angola. 
Nigeria and Egypt alone attracted nearly three quarters of foreign
direct investment inflows to petroleum-producing countries, accounting
for 40 per cent of total foreign direct investment.

21.  Foreign direct investment concentration in oil-producing countries
should not conceal the fact that countries such as Co^te d'Ivoire,
Morocco, Namibia and Swaziland have been able to attract a
considerable portion of foreign direct investment since 1991.  Other
countries like Benin, Ethiopia and Senegal, which experienced a severe
decline in foreign direct investment during the previous decade, have
managed to arrest and even reverse this trend as a result of reforms
and with the advent of an encouraging economic outlook.  Angola, the
Libyan Arab Jamahiriya and Morocco are among the countries that
recently registered a significant rise in foreign direct investment
and the highest gross domestic product growth rates.  The monetary
readjustment in CFA zone countries did little to attract more foreign
direct investment flow than in previous years, although the conditions
were ripe for such an increase.  

22.  The condition of the least developed countries with respect to
foreign direct investment is today of great concern.  The dire
economic problems of these countries, namely, the acute debt burden,
the narrow domestic market and poor infrastructures, all deter foreign
investors.  Besides, a significant portion of the little foreign
direct investment that Africa received was directed to only a few
countries, including Zambia.

23.  Apart from the petroleum sector, foreign direct investment to
Africa favoured the mining and industrial sectors.  To this end,
African Governments have embarked strongly on rationalizing mining
laws, adopting new tax regimes and the divestiture of State-owned
corporations.  For instance, the Ashanti Goldfields Corporation of
Ghana was privatized in 1994 and similar plans are in motion for ZCCM
of Zambia.  With a view to maintaining foreign direct investment flow
in the industrial sector to avoid disinvestment situations such as
those that took place in Nigeria in 1993, new directions are being
pursued in industrial strategies and policies.  More simplified
investment laws have been enacted and currencies have been made
convertible.  

24.  Despite all these efforts, Africa's marginalization in terms of
foreign direct investment flow is comparable to its marginalization in
world trade (see table 3).  This situation is particularly worrying as
foreign direct investment contribution to private investment in Africa
is potentially high (given the low rates of savings and investment)
and foreign direct investment provides the technical skills and
technologies that Africa lacks.


           Table 3.  Foreign direct investment in Africa, 1981-1994

            (In billions of United States dollars and percentages)

----------------------------------------------------------------------
                  Yearly average                              Total
               --------------------                          ---------
               1981-1985  1986-1990  1991  1992  1993  1994  1991-1994
----------------------------------------------------------------------
World            57.2       158.1   162.3  163.4 184.5 204.0   714.2

Developing
 countries       19.4        26.1    40.3   53.2  71.8  83.6   248.9

Africa            1.7         2.8     2.8    3.3   2.9   3.5    12.5

Percentage share
 of Africa       

     World        2.9         1.8     1.7    2.0   1.6   1.7     1.8

     Developing
     countries    8.6        10.8     7.0    6.1   4.1   4.2     5.0
----------------------------------------------------------------------
Africa         

  Oil exporting
  countries       1.4         2.0     1.8    2.3   1.8   2.3     8.2

  In percentages 83.7        72.2    65.0   69.6  62.5  66.1    65.6

  Others          0.3         0.8     1.0    1.0   1.1   1.2     4.3

  In percentages 16.3        27.8    35.0   30.4  37.1  33.9    34.4
----------------------------------------------------------------------

   Source: UNCTAD, 1995.


                       C.  Debt structure and treatment

25.  The debt overhang remained one of the foremost obstacles to Africa's
economic recovery and sustainable growth.  While other heavily indebted
regions of the world, such as Latin America, have gradually emerged from the
debt crisis, Africa continues to suffer from a crushing external debt burden. 
This debt is, however, the lowest in volume of all developing regions, but
considering it on a per capita basis and the capacity of African countries to
service their debt, it is indeed the heaviest.  Africa's steadily rising debt,
which has accelerated over the past years, does not reflect the development of
liabilities ensuing from new investments and contributions from new financial
assistance.  This debt results from accrued arrears and its consolidation at
interest rates applicable on money markets because of the inability of most
African countries to settle their debts.  

26.  For several years, a consensus has been reached between African
countries and the international community on the fact that efforts must be
made to reduce Africa's debt burden in order to release resources to be
allocated to development and enable Africa to resume sustainable growth. 
Initiatives in this regard included:  (a) programmes applicable to bilateral
debt, namely the Toronto Plan, the enhanced Toronto terms, the Trinidad and
Tobago initiative, the Naples agreements, all applicable within the Paris Club
and the Baule and Libreville plans applied by France to French-speaking
African countries; (b) bilateral and multilateral debt relief programmes
(Brady and Baker plans); and (c) market initiatives to restructure private
debt, namely, buy-backs, swaps, trade-offs and conversions into bonds or
equity shares negotiable within the London Club.

27.  The application of these initiatives since the early 1990s has had
limited effects because, on the one hand, they failed to match the magnitude
and intensity of the nature of the debt overhang and, on the other hand, the
three major components of the debt stock have changed.  Bilateral debt is
constantly rising and has remained the major component of external debt. 
Private debt, the majority of which is owed by North Africa, has, on the
whole, dropped slightly and multilateral debt, whose steady rise has made up
for private debt, represents a growing proportion of the total stock of debt.

28.  Bilateral debt treatment has led to the gradual institution of the Paris
Club initiatives that apply, depending on the classification of the countries
as middle-income, slightly indebted or heavily indebted countries.  Some
benefited from the Toronto or the enhanced Toronto terms, making the Paris
Club assume the role of provider of financial assistance previously channelled
only through cooperation agencies.  In 1993, Benin, Burkina Faso and
Mozambique succeeded in rescheduling and restructuring their debts under the
enhanced Toronto terms.  Other countries benefited from the Houston terms, the
Trinidad and Tobago initiative or, from early 1995, the Naples terms which
grant additional reductions to the most heavily indebted countries.  

29.  The application of all these initiatives has afforded to African
countries temporary but not absolute relief from their bilateral debt burden. 
This debt, which has continued to increase considerably, has been aggravated
by huge accrued arrears of debt-servicing.  The Paris Club system has been
amended several times so as to make the payment of official bilateral debt
increasingly flexible.  Despite the introduction of greater flexibility in the
Paris Club, the actual modalities have not kept the outstanding debt position
from worsening, particularly because of the attendant debt-servicing
burden. 5/

30.  Individually, the creditor countries that are members of the Paris Club
have initiated unilateral plans to reduce the bilateral debt of some countries
on the continent.  The Scandinavian countries have been among the first
countries to do so, followed by the Federal Republic of Germany, the United
Kingdom of Great Britain and Northern Ireland, Switzerland, Japan and the
United States of America.  After the Franco-African summit, held at Libreville
in October 1992, France established an official development assistance debt
conversion fund of $830 million for four middle-income countries of the CFA
zone, namely:  Cameroon, the Congo, Co^te d'Ivoire and Gabon.  The idea is to
provide such relief to the countries as would cancel part of their official
debt and channel the proceeds into the execution of development projects. 
This "novel" initiative falls within a long-term perspective since it applies
not only to the principal of but also to the interest on the debt outstanding.

In 1994, the United States (for the first time within the Paris Club) proposed
the cancellation of $228 million, corresponding to half of the debt of the 18
poorest African countries, by extending to them the enhanced Toronto terms.

31.  Successive increases in unpaid debt during the past decade have eroded
the solvency of African countries and have made it difficult to attract new
investments from sources other than multilateral institutions.  Consequently,
the share of debt-servicing owed to multilateral institutions (IMF, the World
Bank and ADB) as part of total debt-servicing obligations has increased. 
Multilateral debt-servicing amounts (which have increased rapidly) have long
outweighed the capacity of most African countries to repay and arrears
continued to increase.  The active search for solutions to this problem proves
that there is an awareness that the multilateral debt-servicing burden raises
a serious problem.  

32.  A debt-service refinancing process has been operated by the World Bank
within what is termed the "fifth dimension", by using resources of the
International Development Association (IDA) for the heavily indebted
low-income countries.  Furthermore, the IDA debt relief fund, established in
1989, has successfully carried out, over four years, numerous operations to
forgive the debt of the poorest African countries.  It succeeded in redeeming
for the Niger and Mozambique early in 1992 and Uganda in 1993, at an average
price of 14 cents for each face value dollar, about $385 million of overall
debt (see table 4).  Similar buy-back transactions were prepared in 1994 and
are currently being carried out for Ethiopia, Guinea, Mali, Mauritania, the
United Republic of Tanzania and Zambia.  The IMF's special drawing rights
(SDR) accrual approach also reflects the seriousness of the multilateral debt
overhang.  This is also true of the discussions currently taking place at ADB
to introduce either a "fifth dimension" or a mechanism for solving the serious
problem of arrears.

           Table 4.  Debt relief fund exclusively for IDA countries

                    (In millions of United States dollars)

--------------------------------------------------------------------------
                           Buy-back
                          price as a
Country and               percentage                          Grants or
  year of    Cancelled    of the face          World Bank    concessional
 agreement   principal       value      Cost   contribution   lending by
---------------------------------------------------------------------------
Niger
(1991)           107           18       19.3       8.42       France
                                                              Switzerland

Mozambique
(1991)           124           10       13.4       5.91       France
                                                              Netherlands
                                                              Switzerland
                                                              Sweden

Uganda
(1993)           153           12       18.4       9.93       Germany
                                                              EEC
                                                              Netherlands
                                                              Sweden
--------------------------------------------------------------------------

     Source:  World Bank data.


33.  Taken together, the results recorded over the past four years fail to
match expectations regarding debt rescheduling with multilateral institutions.

The political and economic instability prevailing in many African countries,
particularly those in sub-Saharan Africa, have prevented them from
implementing the needed reforms and addressing their debt problems.  This has
adversely affected the holding of negotiations with the Bretton Woods
institutions, thereby impeding, in many cases, the conclusion of debt
rescheduling agreements.

34.  The commercial debt constitutes a relatively small part of Africa's total
stock of debt.  In recent years, the commercial banks have practically not
been lending to indebted African countries.  The application of the Brady
Plan, which has succeeded in reducing the debt of the main debtor countries in
Latin America, is encountering serious difficulties in Africa.  Within the
continent, only Nigeria, which owes a heavy commercial debt, has been able to
benefit from the Brady Plan under the auspices of the London Club.  Niger,
Mozambique, Sierra Leone, Sao Tome and Principe, Uganda and Zambia have
succeeded in reducing most of their commercial debt, while benefiting from
other debt reduction operations (debt buy-backs, conversions into low-interest
securities and bonds, debt restructuring) proposed by the London Club to
heavily indebted countries.

35.  In spite of the many efforts made by both the international community
(through the development of new debt rescheduling initiatives) and by African
countries through the acceptance of economic constraints that condition and
accompany the rescheduling process, the main external debt indicators have
shown no significant improvement (see table 5).  The outstanding debt has
continued to rise and now exceeds $310 billion in 1994 as against $300 billion
in 1991, representing 71.6 per cent of Africa's gross domestic product
compared with 67.1 per cent over the past four years.  The debts have become
too heavy and the debt-servicing claim over the meagre export revenue has also
been high, i.e., about one fifth of export earnings.


              Table 5.  Africa's external debt and debt-servicing

                    (In billions of United States dollars)

---------------------------------------------------------------------------
                           1991     1992     1993     1994     1995
---------------------------------------------------------------------------
Total external debt

Africa's total             299.9    297.3    301.7    312.2    322.4
North Africa a/            119.5    118.0    117.9    118.5    121.9
Sub-Saharan Africa b/      163.3    162.9    169.0    177.1    182.5
South Africa                17.1     16.4     14.8     16.6     18.0

Paid debt-servicing

Africa's total              29.7     29.0     28.3     26.3     19.0
North Africa                15.8     16.1     16.3     16.5      9.1
Sub-Saharan Africa b/       10.2      8.6      7.4      8.2      9.9
South Africa                 3.7      4.3      4.6      1.6      NA

Debt-servicing due

Africa's total              44.1     39.8     39.8     38.3      NA
North Africa                23.1     18.4     18.5     18.1      NA
Sub-Saharan Africa c/       21.0     21.4     21.3     19.3     17.7

Percentage of debt/gross domestic
product ratios 

Africa's total              67.1     65.8     66.1     71.6     65.3
North Africa                66.8     67.9     62.8     65.4     72.0
Sub-Saharan Africa c/       67.3     64.2     68.5     76.0      NA
Sub-Saharan Africa b/      102.1     98.9    107.9    126.0    120.4
South Africa                15.8     14.3     13.2     14.5     13.4

Debt/exports of goods and services

Africa's total             223.3    216.7    228.0    231.3    249.6
North Africa               222.1    210.7    215.1    223.6    265.4
Sub-Saharan Africa c/      224.1    220.8    237.2    236.2      NA
Sub-Saharan Africa b/      310.5    312.7    338.7    334.2    358.4
South Africa                61.3     56.3     51.3     55.3     55.9

Debt-servicing/exports of goods
and services   

Africa's total              22.1     21.1     21.4     19.5      NA
North Africa                29.4     28.8     29.7     31.1     19.8
Sub-Saharan Africa c/       17.3     15.9     15.5     12.0      NA
Sub-Saharan Africa b/       19.4     16.5     14.8     15.5     19.4
South Africa                13.3     14.7     15.9      5.8      NA
----------------------------------------------------------------------
     Source:  ECA secretariat estimates based on the World Bank's World Debt
Tables 1994-1995, World Economic Outlook 1996 and other sources.

     a/  Including the Sudan.

     b/  Excluding South Africa.

     c/  Including South Africa.


36.  These general data notwithstanding, the situation has not been identical
within the various African groups.  The least developed countries, which
received greater attention and special treatment, continue to suffer as much
(if not more from the same debt burden) as other countries.  The debt
situation of middle-income African countries, which would have improved
considerably given their potential, has not changed because (quite wrongly)
their case was not sufficiently considered by the international community
during the preparation of debt management programmes.  The January 1994
devaluation has made the debt situation of countries of the CFA zone more
disturbing.  The debt burden has considerably increased in the local currency.
However, it has been bearable so far because of a substantial (albeit
temporary) increase in bilateral and multilateral grants and facilities. 

37.  The volume of debt-servicing has stabilized but, with an average of
$28 billion over the past four years, it exceeds by far the yearly target of
$9 billion recommended under the New Agenda.  The variously successful
strategies applied so far have laid emphasis on rescheduling (which increases
the outstanding debt) and on limited debt cancellation.  They have not made it
possible really to release or make available to the economies the scarce
development finance resources that still come partly from official development
assistance.


              D.  Development of official development assistance

38.  From 1973 to 1992, the total official development assistance for all
developing countries registered a remarkable stability ranging from
0.32 per cent to 0.34 per cent of donor gross national product.  In 1993 and
1994, this percentage dropped below 0.3 per cent of donor gross national
product.  This is all the more disturbing as it marks a further drift from the
United Nations target set at 0.7 per cent of donor gross national product.

39.  Official development assistance flows to Africa dropped from almost
$25 billion in 1990 to less than $21 billion in 1993.  An analysis of the
sources of net official development assistance disbursements (see table 6)
reveals a drastic drop in transfers from DAC countries, most of which are
facing economic difficulties.  The Gulf Arab States, which are the major OPEC
donors, also experienced a considerably weakened economic and financial
situation.  This new situation substantially reduced the volume of overall
official development assistance resources.

40.  Over the past four years, official development assistance has been the
essential component of external assistance for most African countries, and
more particularly for sub-Saharan countries (see table 9).  For countries in
sub-Saharan Africa, the resource flows received yearly exceeded $17 billion
and the shortfall recorded by North Africa is attributable mainly to the
financial straits of OPEC countries.  It is obvious that the overall drop in
official development assistance arouses much concern, particularly for
sub-Saharan countries that attract little private capital.  However, the
continent's least developed countries, which in fact depend most on official
development assistance, were the least affected by this contraction.

41.  Bilateral as well as multilateral aid components of official development
assistance disbursements to Africa show distinct growth patterns.

42.  Bilateral official development assistance to which donors have given
priority has dropped drastically in Africa.  Its main component is tied
assistance.  In the past, it has taken the form of a disguised export-oriented
assistance, and has gone hand in hand with private investment since it serves
as a guarantee for most major contracts, such as those related to building the
economic infrastructure.  Contrary to Africa, Latin America and Asia present
reliable prospects and guarantees for private investment have been their
greatest beneficiaries.

43.  The grant portion of official development assistance to Africa has also
recorded a sharp fall.  Nigeria and Zimbabwe both experienced a reduction of
$230 million in grants between 1993 and 1994.  These new orientations adopted
by donor countries with respect to bilateral assistance, show the will to make
African countries face up to their responsibilities and the need to take
charge of themselves.


         Table 6.  Total amount of net official development assistance
                   disbursements to African countries members of the  
                   African Development Bank, 1990-1993                

                    (In millions of United States dollars)

---------------------------------------------------------------------------
                              1990        1991        1992        1993
---------------------------------------------------------------------------
All sources considered      24 588.2    24 058.7    23 674.8    20 261.9

DAC countries               15 045.8    15 618.5    15 189.0    12 539.7

OPEC countries               3 072.2     1 068.6       561.5       481.3

Multilateral bodies          6 246.7     7 081.1     7 706.6     7 087.7

   including:

   ADF                         594.7       612.4       662.7       666.7
   IDA                       1 901.0     1 924.0     2 011.8     2 149.7
   Organizations of Arab
   countries members of
   Organization of Petroleum
   Exporting Countries          59.6       166.2       217.7       153.2
---------------------------------------------------------------------------
     Source:  Division of debt notification system, OECD, Paris, January 1995.


          Table 7.  Net official development assistance disbursements
                    to African subregions, 1990-1993                 
                      
                    (In millions of United States dollars)

---------------------------------------------------------------------------
       Regions              1990        1991        1992        1993
---------------------------------------------------------------------------
North Africa                7 193       6 988       5 428       3 444

Sub-Saharan Africa         17 452      17 162      18 755      17 582

Others                        491         532         520         428
                           ------      ------      ------      ------
    Total                  25 136      24 682      24 703      21 454

    Total (1992 prices)    27 574      26 166      24 703      21 890
---------------------------------------------------------------------------

     Source:  OECD, Development Cooperation, 1994 Report, Paris, 1995.


         Table 8.  Financial resources committed by the United Nations
                   system in Africa, 1991-1993                        

                     (In millions of United States dollars)

----------------------------------------------------------------------------
                                1991          1992          1993
----------------------------------------------------------------------------
Development assistance          2 184         2 456         2 320

Concessional loans              2 039         2 099         2 263

Loans                           1 198           876           868
                                -----        ------         -----
                                5 421         5 431         5 451
---------------------------------------------------------------------------
     Source:  "Financial resource flows to Africa from the organizations of
the United Nations system", discussion paper No. 3, prepared by the United
Nations Office of the Special Coordinator for Africa and the Least Developed
Countries, 1994.


       Table 9.  Percentage share of emergency relief in United Nations
                  development assistance to Africa, 1991-1993           

---------------------------------------------------------------------------
                                  1991          1992          1993
---------------------------------------------------------------------------
UNHCR                              13            11            14

WFP                                37            42            40

UNICEF                             11            12            14
                                  ----          ----          ----   
    Total                          61            65            68
---------------------------------------------------------------------------
     Source:  "Financial resource flows to Africa from the organizations of
the United Nations system", discussion paper No. 3, prepared by the United
Nations Office of the Special Coordinator for Africa and the Least Developed
Countries, 1994.


44.  Multilateral official development assistance which represents
contributions to international organizations, has developed differently from
bilateral official development assistance.  Africa for the past years, has
greatly depended on multilateral resources which increased from $6.2 billion
in 1990 to $7.1 billion in 1993.  The main donors have been the United Nations
system, the European Union, the ADB Group and IDA.

45.  Through ADB, the African Development Fund (ADF) and the Nigeria Trust
Fund, the ADB Group undertook, at the level of the continent, to mitigate the
inability of countries of the continent to mobilize substantial foreign direct
investment funds so as to give them concessional resources, which African
countries find increasingly difficult to obtain at the international level. 
To a certain extent, it supported the economic and institutional reforms
carried out in many member countries of the region through adjustment loans. 
ADB Group disbursements, which totalled $1.8 billion in 1990, rose to $2.3
billion in 1994.

46.  Since the beginning of the decade, the United Nations system has been the
main source of Africa's external financial resources and Africa has been the
foremost recipient region.  Resources committed (development assistance,
concessional loans and loans) have remained relatively stable. 6/

47.  Within the framework of commitments of the United Nations system in
Africa, the budgets of the main organizations involved in relief operations
(the Office of the United Nations High Commissioner for Refugees (UNHCR) for
refugees, the World Food Programme (WFP) for food relief and the United
Nations Children's Fund (UNICEF) for children) on the whole recorded an
increase in all United Nations disbursements in respect of development
assistance (see table 9) while funds allocated to the United Nations
Development Programme (UNDP) and other more development-oriented organizations
were reduced.

48.  Emergency relief, which is expected to continue rising, is merely short-
term assistance granted at the expense of development financing.  Indeed, what
African countries need is long-term financing that would enable the continent
to achieve self-sustained economic growth and face up to the problems with
which emergency relief has to grapple.


                            IV.  CONCLUDING REMARKS

49.  Despite the efforts made by African countries to improve their use of
official development assistance and the expressed concern of developed
countries regarding the need to support Africa's development, the total volume
of official development assistance to Africa has, since the beginning of the
decade, dropped to about $20 billion.  This amount is far below the objective
set by the New Agenda of $30 billion of official development assistance flows
which were expected to increase by 4 per cent yearly.  

50.  Although accurate data on some countries' performance over the period
1994-1995 and on trends over previous years were not made available, the
various objectives of mobilizing financial resources for development under the
New Agenda have been only partially achieved, four years after the new
programme was launched.  Notwithstanding the hardship that several countries
consented to in implementing political, economic and social reforms, the
overall situation, in 1996, can be summarized as follows:  (a) savings and
investment rates have remained weak; (b) terms of trade have deteriorated and
there has been only a slight improvement in the development of the resources
traded within the continent; (c) factors that determine the flow of foreign
direct investment has not improved sufficiently to get Africa out of being
marginalized with respect to flows of foreign direct investment; (d) the debt
stock has not decreased and even though debt service is being paid and has
stabilized at around $28 billion, the amount is still triple the ceiling
recommended under the New Agenda; and (e) the volume of official development
assistance has been declining.  At a level of about $20 billion in the early
1990s, official development assistance flows fell short by $10 billion below
the minimum recommended under the New Agenda.

51.  Based on a growth model covering the period from 1993, a study conducted
by ECA in early 1993 7/ on financial resources required for Africa's
development in the 1990s predicted that the gross domestic product growth rate
would reach 6 per cent by the year 2005.  None the less, the assumptions made
during that time and hence the conclusions arrived at, contradict today's
realities.  As compared with the predicted average gross domestic product
growth rate of +2.2 per cent in 1993, rising to +4.1 per cent in 1998, the
actual growth rate in 1993 was only +1.1 per cent.

52.  With a recorded growth of +3.4 per cent in 1994 and +4.5 per cent in
1995, there is hope that future trends will confirm the forecasts.  With
regard to the projected trade balance deficit of $9.5 billion reaching $34.8
billion in 1998, although the foreign trade imbalance was only $6 billion in
1993 and $8 billion in 1994, the trade volume of exports and imports was about
$10 billion short of the model forecasts.  Moreover, terms of trade seriously
deteriorated over the same period.  Foreign direct investment, predicted to
reach $7.1 billion in 1993 and $8.9 billion in 1998, amounted to less than $4
billion in 1993 and 1994.  The anticipated steps to limit the debt stock and
gradually reduce debt-servicing to what it was at the time the New Agenda was
launched was not effected and while there has been a reduction in paid-up
debt-servicing, the stock has increased and thus compounded further the debt
issue in the future.

53.  All these pitfalls do not stem from the lack of will and/or efforts but
rather from the failure of the African countries and the international
community to implement more sustained practical measures.  While it is the
primary responsibility of African States to bear the bulk of their development
burden by tapping as a matter of priority their own financial resources, the
rigid international economic environment, the domestic economic hardship and
the lukewarm disposition of some creditors to adopt radical measures have
constituted obstacles to the mobilization of financial resources and to the
development of Africa.  Most African countries will be unable to implement the
economic reforms required for development without further domestic and foreign
financial resources.  Nor can Africans and the international community afford
to see yet another international initiative for Africa's socio-economic
recovery and development fail.


                                     Notes

     1/   Official Records of the Economic and Social Council, 1995,
Supplement No. 18 (E/1995/38).

     2/   Ibid., 1994, Supplement No. 18 (E/1994/38).

     3/   Robert G. Kind and Ross Levine, "Finance and Growth:  Schumpeter
might be right", Quarterly Journal of Economics, volume 108, August 1993.

     4/   See "Foreign Direct Investment in Africa", UNCTAD 1995, Current
Studies, series A, No. 28.

     5/   Report on Africa's external debt situation, p. 18, Contact Group on
Africa's (external) debt, OAU/ECA/ADB joint secretariat, 1994.

     6/   "Financial resource flows to Africa from the organizations of the
United Nations system", discussion paper No. 3, prepared by the United Nations
Office of the Special Coordinator for Africa and the Least Developed
Countries, 1994.

     7/   Strategies for financial resource mobilization for Africa's
development in the 1990s (E/ECA/CM.19/5), February 1993, ECA.


                                  BIBLIOGRAPHY


 1.  Economic Report on Africa (1993, 1994, 1995), Economic Commission for
     Africa (ECA)

 2.  Expanding and integrating the informal sector into African National
     Economies, Office of the Special Coordinator for Africa and the Least
     Developed Countries, United Nations, 1994

 3.  Reviving private investments in Africa:  Policies, strategies and
     programmes, E/ECA/CM.21/7, March 1995, ECA

 4.  Critical Capacities for the Mobilization and Efficient Allocation of
     Domestic and External Financial Resources, E/ECA/CM.20/11, March 1994,
     ECA

 5.  Strategies for financial resources mobilization for Africa's development
     in the 1990s, E/ECA/CM.19/5, February 1993, ECA

 6.  Report on the implementation of the United Nations New Agenda for the
     Development of Africa in the 1990s, E/ECA/CM.20/3, April 1994, ECA

 7.  Committee for Development Planning, report on the twenty-ninth session,
     January 1994, Official Records of the Economic and Social Council, 1994,
     Supplement No. 2 (E/1994/22)

 8.  International Finance Corporation (IFC), Trends in private investment in
     developing countries, 1995 - Jack D. Glen, Mariusz A. Sumlinski, World
     Bank, 1995

 9.  Mechanisms for stabilizing the export earnings of African countries
     (International Commodity Agreements and Commodity Exchanges),
     E/ECA/TRADE/92/19, ECA

10.  Study on prospects for financial flows to Africa, S. O. SY, ECA, 1992

11.  Development Assistance Handbook - DAC Principles for effective
     development assistance.  Organisation for Economic Cooperation and
     Development (OECD), Paris, 1992

12.  The ADB Group in the 1990s:  Operational programme for 1992-1996 and
     beyond.  African Development Bank (ADB), 1992

13.  Debt alleviation by the Paris Club:  Recent developments and prospects,
     Ann Vourc'h, OECD Development Centre, June 1992

14.  Robert G. King and Ross Levine - Finance and Growth:  Schumpeter might be
     right:  Quarterly journal of economics, vol. 108, August 1993

15.  Foreign Direct Investment in Africa, Current studies, series A, No. 28,
     UNCTAD, 1995

16.  Report on Africa's external debt situation.  Contact Group on Africa's
     external debt.  OAU/ECA/ADB joint secretariat, 1994

17.  Discussion Forum on the financing of development in Africa,
     E/ECA/TRADE/1994/1, ECA

18.  Report on new initiatives to solve Africa's debt problem.  TRADE/1993/13,
     ECA

19.  Financial resource flows to Africa from the organizations of the United
     Nations system, United Nations Office of the Special Coordinator for
     Africa and the Least Developed Countries, discussion paper No. 3, 1994

20.  Anticipated impact of the Uruguay Round agreements on African economies: 
     A  preliminary study.  TRADE/1994/7, ECA

21.  Report on the Economic and Social Situation in Africa 1996,
     E/ECA/CM.22/4, ECA, 1996.

22.  World Economic Outlook:  1996, World Bank.


                                     -----
 

This document has been posted online by the United Nations Department of Economic and Social Affairs (DESA). Reproduction and dissemination of the document - in electronic and/or printed format - is encouraged, provided acknowledgement is made of the role of the United Nations in making it available.

Date last posted: 28 December 1999 17:35:10
Comments and suggestions: esa@un.org