Schlettwein tells Paris Club how important quality investments are
While the quantity of investments for a country is important and need to be increased, equally important is the quality of such investments.
This was the message delivered by Finance Minister Calle Schlettwein to the 4th Conference of the Paris Forum in Paris, France on Tuesday.
“Bad and one-sided investment agreements are more often than not detrimental to developing economies and are therefore undesirable.
“The Addis Ababa Action Agenda for Development needs win-win scenarios through which inclusive economic growth and shared prosperity is brought about. Nothing less than that is good enough,” Schlettwein said at the event that was officially opened by French Finance Minister Michel Sapin.
The Forum, hosted by the Paris Club, was attended by ministers of finance from various countries, including Russia, Senegal, South Africa and Korea, as well as representatives from the financial and industrial sectors of Germany, Brazil, Netherlands, United Kingdom, Gabon, the Bank of England, the Commonwealth, World Bank, IMF, UN, People’s Bank of China and the Federal Reserve Bank of Chicago.
The Paris Club is a group of officials from major creditor countries whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries.
Since the Paris Club was set up 60 years ago, members have restructured or written off close to US$600 billion of debt for 90 countries, including Myanmar, Cuba and Yugoslavia.
From the onset of his statement, Schlettwein thanked the Paris Club for inviting Namibia to partake in the Forum and share thoughts on the theme, ‘Putting into practice the Addis Ababa Action Agenda: Trends in official debt and towards operational principles for sustainable financing for development’.
“From the global perspective, we start from the premise that debt capital, when properly structured, well-targeted and prudently managed forms an important source of financing for development, given the substantial financing needs, such as those engendered in the Addis Ababa Action Agenda.
“We note, however, that a significant build-up of debt, whether private or public, domestic or sovereign, impedes growth on account of limiting the ability to conduct countercyclical fiscal expansion during bust cycles.
“This is, by and large, the state of play in the global economy today, with heterogeneity across economic groups and countries,” said Schlettwein.
The Addis Action Agenda for development places significant emphasis on domestic resource mobilisation as a sustainable means of financing development at the national level.
Recent stocktaking by the International Monetary Fund (IMF) indicated that global debt is at record highs and still rising.
Total non-financial sector debt was estimated at US$152 trillion by 2015, some 225 percent of world Gross Domestic Product (GDP). One-third of this global debt trajectory is public, which increased from about 70 percent of GDP in the early 2000s to over 85 percent of GDP today.
Schlettwein told the gathering that as a small, open economy with a trade-to-GDP ratio of over a 100 percent, Namibia has not been able to escape from the impact of the exogenous shocks on the economy through trade and commodity price fluctations.
Pointing out that Namibia is one of the five investment grade sovereigns on the African continent, he added that about 17 percent of GDP (or about 40 percent of expenditure) is allocated to social sectors in terms of social safety nets and to education and health.
He also emphasised that within the past 26 years of political independence, the economy has grown on average by 4.6 percent and per capita income has more than quadrupled to propel the country to an upper middle-income status by 2010, according to the World Bank classifications.
Namibia is also ranked the fourth most diversified in Africa, with the tertiary services sector accounting for over 50 percent of GDP. However, Schlettwein admitted that shocks to commodity prices and low-growth episodes for Namibia’s main regional trading partners, South Africa and Angola, compounded by the prolonged drought in the sub-region, have contributed to a significant reduction in economic growth for Namibia this year, falling from 5.3 percent in 2015, to an estimated 1.6 percent in 2016.
“Industrialisation and value addition that brings about improved productive capacity has to be at the core of the Addis Ababa Action Agenda.
“Not only has value to be added to our raw materials and natural resources, but also the value share from these resources has to be improved. Moving up the value chain and participating in regional and global value chains is required,” said Schlettwein.