Director General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, has expressed fears that many countries are at risk of entering debt distress, hence the need for debt relief for them.
She stated this at the opening ceremony of the 2021 meetings of the African Development Bank (AfDB) on Wednesday.
“When thinking about how to use debt productively, it is paramount to think about how it is managed and what it is used for.
“Debt means to go into high yielding activities with high rates of returns. One potential area for high returns on investment is acting to lower what economies call trade cost, the cost associated with moving goods from the factory gates to the final consumer.
“This would raise the productive capacity of African economies, ultimately reducing debt burdens and helping build regional value chains and competitiveness of firms on the continent,” she said.
The WTO DG said to boost Africa’s economic recovery, lower trade costs will be required.
According to her, the record-high trade costs hinder the movement of goods.
“Currently, moving manufactured goods across international borders costs roughly 2.7 times more than moving the same goods across the same distance domestically. Costs are even higher for agricultural goods and services.
“Shipping and logistic expenses often accounts for a significant share of these costs and are key factors of why trade cost between high-income countries and much lower than those among low-income countries.”
Okonjo-Iweala said trade costs could be managed through channels like the African Continental Free Trade Area (AfCFTA), improving internet infrastructure to boost e-commerce, implementing regulatory reforms, and developing infrastructure in ports and roads.
