By BUUMBA CHIMBULU

AFRICAN countries have been cautioned by the United Nations Conference on Trade and Development (UNCTAD) to carefully monitor their current accounts as they are the major contributors to recent external debt.

UNCTAD explains that the current account requires a careful monitoring of the debt vulnerabilities of countries to recent macro fiscal shocks, such as falls in the prices of some commodities.

This is according to the 2016 Economic Development in Africa report on debt dynamics and development finance on the continent.

“Current account deficits have contributed to recent external debt dynamics in Africa, with balance of payments problems associated with rapid external debt accumulation in some instances.

“However, with regard to foreign direct investment, while inflows may contribute to reducing reliance on debt, increased net income payments associated with such inflows may also contribute to current account deficits that increase reliance on debt financing,” reads the report in part.

UUNCTAD reports that recent debt accumulation in several African countries appeared to have been driven mainly by non-interest current account deficits, in both heavily indebted poor countries and non-heavily indebted poor countries.

It however reports that there are other potential drivers of debt accumulation in Africa, such as the end of the commodity super cycle and, in recent decades, faster integration into international financial markets, in particular following the global financial crisis.

“In sum, recent debt accumulation in several African countries appears to be driven mainly by the deficit of non-interest current accounts, in both heavily indebted poor countries and non-heavily indebted poor countries.

“In general, improving current account deficits in developing countries with undiversified exports may take time, implying a need for structural transformation in the composition of exports and possibly also of imports,” reads the report.

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