**Policy, Research, and External Affairs**

# **Economics and Finance**

# WPS 764

This papera product of thc Economics and Finance Division, Technical Department, Africa Regional Off1ice - w;s prcsecnted at the World Bank symposium on Africain Externazl Finance in **ihe** 1990s, held in September 1990 in Washingtoni, DC. A condensed version ol the paper will appear in the forthcoming symposium volume. Copies of the complete paper are available free from the World Bank, 1818 H Strect NW, Washington DC _20433._ Please conitact MavitaGomez, room J3-282, extension 34349(87 pages, with figures and tables). October 1991.

The gross forcign financing requirements for all of Sub-Saharan Africat -- belore debt relief of -- any kind or thc accumulation of newv arrears are projected to average about $28 billion a year (in nominal prices) between 1991 and 2000, or about $50 per capita annually. Thesc figures comparc with estimatcd gross tinancing of $27$28 billion in 1988 and S24-$25 billion in 1982. This is equivalent to only about 12 to 14 percent of total capital flo\ws to the developing world in 1988.

The annual levels decline in mid-decade to about $26-$27 billion a year but rise to more than $30 billion by 2000. This variation in dte trend reflects combined movements in the balance of trade in goods and services (excluding interest), debt service obligations, targets for increase- in international reserves, and private transfers. High levels in the early years are the result of heavy debt service obligations; the later decline in these obligations helps reduce requirements mid-decadc. Debt service obligations rise in 1991-93 on nonconcessional debt contracted in **the** last half of the 1980s but decline in 199497 and stabilize after that. The rising requirements in the last part of the 1990s result mnainly from **dhe** continuallv wideninlg trade deficit.

Debt service obligations - before rescheduling and before the accumulation of any additional arrears -- comprise more than half of the gross extcrnal financing requirements in the first half of the 1990s, but fall to about 40 percent by the end of the decade. Debt scrvice obligations were equivalent to about three-fourths of the gross external financing requirements in 1988 but only about a third in 1982.

The importance of dCbt service in total requirements reveals that the extemal financing problem in Africa is much more than a structural imbalance of imports and exports. Debt relief measures will be an important source of finaneing.

For low-income countries, however, debt relief alone will not solve their financing problem because their trade balance will continue to deteriorate. But for **most** middle-income countries where **thc** trade balance is positive. debt relief may have a much more decided impact.

The i'RE Working P'aper Set es dissenrinaics the findlngs of **A (irk** under wa. in ihc Banlk's Pol icy, Rcscarch, and Exteemal AffairsComlplex. Anobjlecnlvcoftlheseri. s is to get th se flndingoutquickl , even if plesentations are lt ss than fullyrxoished. **Tlrc** Findings. inlerpretations, and concl.uions **in** these papers do not necesiaris represcnt official Bank pohct.

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