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RE: African infrastructure development: Where does the money tree that pays for African infrastructure grow? Part 6 in a series
This is very interesting, the governments that fund these infrastructure projects do you suppose it is money they lent from the IMF or Brics Bank or does their tax payers pick up the bill? Great post !
Excellent question!
Great question, @louiscpt, and thank you for the compliment.
I answer under correction, but I think there are very few African countries currently borrowing from the IMF. There are discussions this week in Washington between countries in dire financial straits and the IMF; one of the countries in serious discussions is Zambia, led by its excellent Minister of Finance, who recognises the serious implications of an IMF bailout. He and his team also recognise that a deal with the IMF has to be based on a plan that the country comes up with itself for its financial recovery, in collaboration with the IMF. As you probably know, our own country of South Africa is contemplating similar discussions, but I'm not convinced the penny has dropped with our Finance Minister that breaking Trevor Manuel's treasured covenant of NOT borrowing from the IMF will have drastic implications on all levels of our economy - and the government would have to come up with the plan on which the bailout is based. I don't know enough about the BRICS Bank's lending policies to comment, but I suppose like other development finance institutions a lot of their lending is project-based. Regardless, the taxpayers (including those who may not pay income tax, but will pay VAT and other consumption-based taxes) will pick up the bill at some stage. Grant money is scarce and a very small portion of the national fiscus. The good news, I suppose, is that development finance to lower income countries is usually "concessional" - provided on more favourable terms - than commercial funding.
Thank you for this reply , The problem I have and I might be wrong with borrowing from the IMF or for that matter a country like China nothing is for free . My first guess is that they would need some sort of security in case we cant pay , and that will be state owned assets that makes a profit like Eskom ,Telkom and SAA :) for instance . And we are talking most probably Billion's of Dollars . If they cant pay they will take those profit making companies increase the cost of services to get there money back and the government will never be able to recover and that means we will be taxed to oblivion as we are now.I am not a profit of doom but I think this money printing since the last crash in 2008 is going to come to a bad end and many people is going to be hurt in this process of experimenting the global dept can not go on like this countries are starting to fall as they cant even service the interest on that debt. Thank heavens for Crypto...