BRICS countries must engage extensively about debt-driven development approach for infrastructure

Delegates listen on during the plenary session as Russian President Vladimir Putin delivers his remarks via video link during the 2023 BRICS Summit last week. In his speech, Putin stressed the importance of fostering cross-border trade and investment.

Given the shift in power from unipolar to multipolar, as shown by the advancements of BRICS block countries, it is vital to investigate the debt-led development model to finance infrastructure in Africa, especially in Southern Africa.

In his speech at the BRICS Summit, Russian President Vladimir Putin stressed the importance of fostering cross-border trade and investment.

To effectively contribute to the member states’ faster socio-economic growth, co-operative links must be strengthened and direct dialogue between business communities must be increased. Consequently, the Sustainable Development Goals can be accomplished.

 

The United Nations 2030 Development Agenda, which places a strong emphasis on infrastructure development, depends on the Sustainable Development Goals (SDGs) being achieved.

Strengthening domestic and international financing resources for infrastructure development is crucial to addressing the infrastructure gaps and fully achieving Goal 9 of the SDGs (industry innovation and infrastructure) and Aspiration 1 of Agenda 2063 of the African Union (A prosperous Africa based on inclusive growth and sustainable development).

The Bretton Woods Institutions (BWIs) debt-driven development model has some negative characteristics that undermine balanced growth between developed and developing countries. Essential elements of structuring infrastructure finance include transaction cost economics through transaction advisory services, which oftentimes benefit the sources of funding. Consequently, investment benefits the country of origin disproportionately occasionally through methods including illicit cash transfers, limiting SDG achievement.

Joseph Stiglitz’s information-theoretic analysis of the capitalist economy, which he characterises as a “new paradigm based on imperfect information”, contributes to the production of governance issues in key developmental instruments in developing countries, including state-owned enterprises.

Due to inequitable transaction costs and information asymmetry, the global financial sector dominates developing countries’ economies, while opportunistic rent-seekers encourage corruption. An example of this is the phenomenon of financialisation, which focuses on accumulation through financial channels rather than commerce and manufacturing.

The success of the BRICS group of countries in reaching the SDGs depends on the debt-led growth model, which is necessary for financing infrastructure.

All of these elements play a role in this paradigm. Global instability, rising inequality, and the growing debt crisis have all undermined ideas for balanced growth.

To improve trade conditions and lower poverty in society, there is a need for balanced growth, which includes rapid industrialisation and the quick expansion of efficient and functional infrastructure.

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