African nations call for urgent reform of global financial system amid G20 debt program concerns
Many African countries are said to find the G20 Common Framework debt restructuring program unappealing due to its conflicting restructuring goals. Lobby organizations demand that the global financial system be urgently reformed. According to a recent statement from a lobby group for indebted nations, the African Forum and Network on Debt and Development (AFRODAD) and partners, debt relief beneficiary countries fared poorly in terms of development when compared to non-debt relief countries. This was cited as the failure of various relief initiatives.
The cost of debt servicing continues to consume a significant amount of public resources with attendant ramifications for public investment, economic growth, and sustainable development, a statement issued in connection with a joint meeting of the International Monetary Fund (IMF) and World Bank revealed.
The AFRODAD and partners are demanding an urgent reform of the global financial system as Spring Meetings by the International Monetary Fund (IMF) and World Bank held Washington DC from 17-19 April 2024.
It said that the debt crisis is no longer a risk but a reality in many African countries, with almost half of the continent's countries in debt distress or high risk of debt distress. According to the statement in 2024, Africa's total debt stands at USD 1.13 trillion, representing a 374 percent increase in public debt from the year 2000 to 2024.
The cost of debt servicing continues to consume a significant amount of public resources with attendant ramifications for public investment, economic growth, and sustainable development.
It added that around 30 million people in Africa were pushed into extreme poverty in 2021, and the trend continued upwards in 2022 and 2023.
Debt to GDP ratio averages 198 percent in Sudan and over 100 percent in the Democratic Republic of Congo, Mozambique, and Zambia.
The mounting debt trends are clear evidence that debt relief initiatives like the Heavily Indebted Poor Countries and Multilateral Debt Relief Initiatives (HIPC/MDR), the Debt Service Suspension Initiative (DSSI), the 2021 Special Drawing Rights (SDRS) issuance, and currently the G20 Common Framework (CF) have failed, as they created room for more borrowing while beneficiary countries performed poorly in development terms compared to nondebt relief countries. According to the statement issued on Thursday, April 18, regarding the G20 CF'S shortcomings in offering outright debt cancellation, the exclusion of middle-income economies, such as Egypt and Tunisia, even though the debt sustainability analysis shows distress. It added that being skewed to bilateral debt, despite 40 percent of Africa's debt being owed to private creditors, the associated risk of credit downgrade and struggle to bring creditors with contradicting objectives in the restructuring process make it difficult for the G20 CF to attract many African countries and to restructure successfully. "Therefore, there is a pressing need to change direction and strategy towards providing structural solutions to the problem of recurrent indebtedness on the continent," it added.
Countries like Chad, Ethiopia, Ghana, and Zambia applied for G20 restructuring, but they continue to struggle with a slow process that has negatively affected their credit rating and has not given them a sustainable solution to their debt situation.
Zambia reached a restructuring agreement with its official creditors, "which is commendable but while debt relief or restructuring is necessary to create fiscal space, solutions for the long term should focus on structural policy reforms linked to the concerns on the financial architecture." Moreover, Ghana, which defaulted on its debt obligations in December 2022 and had approached the G20 for restructuring, just saw the process halted on 15 April 2024 as the IMF indicated that the deal would not fit its sustainability parameters. As the Spring Meetings take place, AFRODAD and other Civil Society Organizations are calling for a governance restructuring of the IMF and World Bank to end the debilitating financial commitments of Africa's lowincome countries and developing ones. "This is the time to emphasize a bold move towards structural solutions. This is the time for Africa to vehemently push back against the IMF World Bank policies that do not prioritize people and against creditors who lend irresponsibly with no respect for the duty of care to the borrower," the statement issued by the lobby group said.
If the IMF and World Bank are truly concerned about improving African lives, they must first acknowledge that they are at the heart of increasing debt, economic dependency, and poverty on the continent and therefore welcome their restructuring to become fit for purpose.
"I join the call for international collaboration to build a developmentoriented debt architecture that is more just and equitable and affords developing countries and affected communities the fiscal space to invest in their country's growth and sustainable development," Dennis Francis, President of the General Assembly of the United Nations. "The debt crisis is a development crisis, and unless we do something very urgent to fix the global financial architecture, we are going to see a regression in the progress that has been made towards Agenda 2063 and the people, especially the vulnerable ones including women and girls, who will be hit even harder," Jason Braganza, AFRODAD'S Executive Director.