By Melaine Nsaikila
[dropcap type=”circle” color=”#FFFFFF” background=”#8C212A”]D[/dropcap]ebt is bad. Unsustainable debt is even worse, especially for a nation. Nation-states, like most individuals, usually incur debt for major infrastructural projects. How well a country manages its debt structure usually gives a good indication of how well the country is building for the next generation.
Adam Smith, in noting the value of being debt free, posed the question “what can be added to the happiness of a man or a nation who is in health, out of debt and has a clear conscience?”
Nation-states do not die, people die. In this light, Herbert Hoover couldn’t have made it clearer when he said “blessed are the young for they shall inherit the national debt”. What African presidents, Cameroon’s inclusive, should realize is that as Dave Ramsey once said “Debt is Dumb, and Cash is King”.
Going by this logic it is obvious that nation-states should strive to avoid debts or, rather, be prudent when it comes to the acquisition of debts because, to paraphrase Alexander Hamilton, a national debt is a blessing if, and only if, it is not excessive. African presidents and policymakers, Cameroon included, are yet to develop and put into effect comprehensive mechanisms and teams of experts who would provide counsel based on key variables on whether a country should go for a given loan or not. Such variables include but are not limited to:
- The tenure or time period of the loan
- Ability to repay the loan
- The interest to be paid
- A cost-benefit analysis of the project to be executed with the borrowed funds. This would help determine the economic viability of the projects and give a justification of borrowing or not
Without putting in place such a mechanism, coupled with a high propensity to borrow, the national debt is bound to rapidly increase to unsustainable levels. It becomes even more difficult to repay these debts when the tenure spans the lifetime of the current leaders or generation. Hence, going by projections or forecasts, the impact of debts on future generations should also be assessed before a final commitment.
Cameroon on its part, has a debt history with numerous lessons that should be a guide to its current borrowing and debt management policy.
Melaine Nsaikila is an Economic Policy Analyst at the Nkafu Policy Institute, a leading Cameroonian think tank at the Denis & Lenora Foretia Foundation. He can be reached at [email protected]