The Future of Work Capsules: the global debt crisis and lessons from the 1980s

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Baptista Sarah Gebu (Mrs.)

We recently celebrated African Union Day. On this Day in 1963, the Organisation of African Unity – now known as the African Union – was established. We commemorate this Day by reflecting on the accomplishments of people across the African continent, and on the challenges we still endure and must conquer. This year, I spent this very significant Day with queen mothers – where I delivered a speech and helped build capacity for some other women and girls present. Long live the African Union, and may it eventually help unite Africans and all Blacks in the diaspora!

The entire world is said to be in a debt crisis, national budgets are at breaking point as some governments are forced to cut spending, and many borrow more to stay afloat. What can we do to stop the global debt crisis? Can Africa do something to prevent the debt typhoon? Is history repeating itself, since the 1980s are remembered by many as a lost decade when many economies faced financial tremors which are said to have eroded them? A ‘lost decade’ is an economic phrase used to refer to a decade with no financial gains in the stock market; this lost decade refers to a period of economic stagnation. In a World Bank tweet recently, it was announced that in the next 12 months as many as a dozen developing economies could prove unable to service their debt. What could the world economies be heading to?

According to the Federal Reserve history, “During the Latin American debt crisis of the 1980s – a period often referred to as the ‘lost decade’-many Latin-American countries became unable to service their foreign debt. The Federal Reserve and other international institutions responded to the crisis with a number of actions that ultimately helped alleviate the situation, albeit with some unintended consequences. Lessons from the past can help us manage the future.

What was the trigger of this lost decade? There were two large oil shocks that caused rocketing oil prices which eventually disturbed the finances, created big deficits and pushed most economies to a point of collapse. According to the New York Times, Mexico was the first to fall as a long, anxious queue formed outside on the outskirts – with many job-seekers, mostly women, coming from far away and several other countries announcing they couldn’t pay their debts. Brazil, Peru, Chile, Columbia, Venezuela, Argentina and Ecuador were all affected with unemployment, deep recession, slow economic growth, high inflation and mounting debt.

Developing economies are now said to be suffering from debt crisis, and some economies are collapsing from ballooning debt and shrinking foreign reserves among high inflation rates. There isn’t enough money to pay for basic necessities of life such as food, proper medical care and shelter among others, due to mismanaged finances as those economies spent more than the national income and destroyed the economy. The global factors contributing to these include induced slowdown, growing cost of borrowing and recently Russia’s invasion of Ukraine.

The sanctions imposed by the West have increased food and fuel prices. The fear is that these Sir Lanka-type crises can mutate as put forward to the world in one news report. Sri Lanka has defaulted on a multi-million pound foreign debt payment, deepening the nation’s worst economic crisis since it gained independence in 1948. The new Prime Minister, Ranil Wickremesinghe, is appealing for foreign help to bail out the government, which has almost run out of foreign currency reserves the BBC reported. The entire developing world is said to be at risk.

The World Bank issued a warning, saying developing nations faced a debt crisis. This issue named 17 countries, saying this could crush their economies in 2022. Nine days later, Russia invaded Ukraine – leading to disturbance in supply chains compounded by sanctions imposed on Russia by the West which have put financial markets in disarray and triggered a global oil crises, making the economic forecasts darker and darker.

The UN warns 107 countries have severe exposure to consequences of the Ukraine War. These countries are forced to face one of the three crises: namely the rising food prices, rising energy prices and tougher financial conditions. These 107 countries together represent 1.7 billion people or one fifth of humanity. 69 countries face all these 3 risks, which includes 25 countries in Africa and the same for the Asia-Pacific region and 19 countries for Latin America.

To commence, Egypt imported US$5.2billion in wheat, becoming the first largest importer of wheat in the world. Egypt, the land of the pharaohs, as the world’s largest importer of wheat depends on Black Sea supplies – importing about 80% from Russia and Ukraine in 2021. Egypt is now said to have approved India as one of its suppliers. An Egyptian delegation went to India to discuss wheat imports, visiting fields and grain stores in various regions for a rigorous quality review. Egyptian wheat reserves may not last much longer per media reports. Accounting to the Middle East Monitor, “Russia’s invasion of Ukraine and imposed sanctions could lead to bread shortages across parts of the Arab world, including war-torn Yemen where millions are already on the brink of starvation”.

According to a special briefing by the US-based Middle East Institute (MEI) earlier this week, “The Ukraine crisis could trigger renewed protests and instability in several MENA countries”. The region is heavily reliant on wheat supplies from both countries in the conflict, with half of Ukraine’s wheat exports making their way to the Middle East North Africa (MENA) region, and Russia also provides a significant amount of wheat.

“If a war causes disruptions to these supplies, this could hit food import-dependent countries like Egypt, Yemen, Libya, Lebanon and others hard,” the report added. Rising prices are set to stoke an inevitable rise of civil unrest in Egypt, Tunisia and Lebanon.  In Tunisia, trade deficits widened to US$800million, while inflation and fuel prices are said to be high – and this could cause civil unrest. In Lebanon, fuel prices went up, the currency lost its value, and the country is said to have gone to the World Bank for loan to ensure food security.

“Tunisia has experienced a sharper decline in economic growth than most of its regional peers, having entered this crisis with slow growth and rising debt levels,” the World Bank reported. In Argentina, the country is running to the IMF for a bail-out. Research has it that their debt levels are mounting, and the same with inflation as the country is hit by a bread shortage. “Argentina, which has been struggling with high inflation for years, is on course to see inflation of at least 60% by end of 2022” reported the DW news.

In Ghana, debt and interest rates are choking the economy. According to the Business and Financial Times, attempts to cool off inflationary pressures remain unsuccessful, as consumer inflation increased almost four-fold to 27.6 percent year on year from 7.5 percent last year.  In Kenya, government is reported to have gone in for a US$244million IMF loan. In South Africa the debt is up to 80% of GDP, the IMF reported. In Turkey and elsewhere, the threat of debt crisis is looming. What are your thoughts, is it Russia’s invasion of Ukraine or is it the sanctions imposed by the West?

In the next 12 months, as many as dozen developing economies could prove unable to service their debts, as put forward by the World Bank. This will be the largest debt crisis in a generation. The entire world is in debt distress, national budgets are at breaking points; however, experts have advised mitigating road maps to urgently consider. Africa and other suffering economies must manage their borrowing and lending better; think of introducing better; promoting alternatives to borrowing, such as improving tax collection and reducing borrowing; and increasing accountability and transparency.  These are some of the avenues which experts advise we can use to navigate our way around this debt crisis.

For us in Ghana, our former head of state Ignatius Kutu Acheampong’s “operation feed yourself” initiative – which was an agricultural programme administered in Ghana under the then military general – aimed to increase levels of food crops produced in Ghana for domestic consumption and attempts at self-sufficiency. This initiative should be revisited in full force. The recent government ‘Planting for Food and Jobs’ initiative was created on this premise. Let’s go back to our roots. “Sankofa” is good.

The complete Africanisation of our minds, bodies and souls is needed as we make efforts to return to Eden and support our domestication plan for self-sufficiency. The over dependency on imports is not good for Africa. The benefits of a single trade market for Africa must be re-activated and promoted. I am so aligned to the Managing Director of FBN Bank Victor Yaw Asante’s call for the AU to solicit regional integration and support, and forge fresh collaboration that will help the African Continental Free Trade Area (AfCFTA) remove all trade barriers from the continent which hinder intra-African trade.

Baptista is an influencer, a human resource professional with a broad generalist background. Building an efficient & effective workforce team is her business. Affecting lives is her calling!  She is a Hybrid Professional, HR Generalist, strategic planner, innovative professional connector, and a motivator. You can reach her via e-mail on [email protected] and follow this conversation on all social media pages. Facebook / LinkedIn/ Twitter / Instagram: FoReal HR Services.   


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