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- The Economic Commission for Africa says 40 per cent of African countries face rising debt crisis
- The commission called for the adoption of alternative financing mechanisms
- It also noted the importance of capacity building, local expertise and a united front during negotiations
The United Nations Economic Commission for Africa (ECA) has raised alarm over rising debts across Africa, saying that 40 per cent of countries on the continent are either in debt distress or at high risk.
The commission said it is worried that most African nations in the crisis are appropriating more funds to debt interest payments than to critical sectors that could stimulate development.
Hanan Morsy, Deputy Executive Secretary and Chief Economist at the ECA, stated this at the ongoing 2024 African Economic Conference (AEC) in Botswana, with the theme, ‘Securing Africa’s Economic Future Amidst Rising Uncertainty.’
The event is co-hosted by the African Development Bank (AfDB), the United Nations Economic Commission for Africa, and the United Nations Development Programme, in collaboration with the Botswana Government. It provides a platform for African leaders, economists, and policymakers to tackle the continent's economic challenges.
Need for alternative financing mechanisms
In a fireside chat on ‘Global Financial Architecture Reform Agenda: A Focus on Debt and Tax,’ Morsy said it was important to adopt alternative financing mechanisms and overhaul the G20's common framework.
She said, “There is a need for an efficient, timely and transparent framework. We must integrate the private sector, avoid prolonged negotiations and ensure fairness across all creditors.”
Morsy noted the success of Egypt’s Samurai and Panda bond issuances, which secured lower interest rates of 1.5 per cent and three per cent, respectively, as against Eurobonds’ eight per cent rate.
She said adopting alternative financing mechanisms will help lower borrowing costs.
Morsy said, “These bonds attracted interest rates of 1.5 per cent and three per cent, respectively, a stark contrast to the eight per cent rate associated with Eurobonds.
“African countries must tap into alternative financing mechanisms and utilise guarantee schemes to lower borrowing costs.”
On the lopsided distribution of the International Monetary Fund’s (IMF) Special Drawing Rights (SDRs), Morsy said Africa received only five per cent of the $650 billion issued post-COVID-19, while wealthier nations received trillion-dollar allocations.
She urged the reallocation of unused SDRs from fiscally wealthier nations to African economies through multilateral development banks like the AfDB to ensure resources reach the regions that need them most.
African countries need to have a unified front at negotiation tables
The Chief Economist and Vice President of the AfDB, Professor Kevin Urama, highlighted the importance of African countries maintaining a unified front and collaborating to strengthen financial management systems among governments.
Urama cited the Public Financial Management Academy for Africa, which was launched in 2021 to modernise tax systems, expand tax bases, and digitise financial operations.
He said African countries can successfully navigate the complex global financial system if a common position, backed by in-depth data and analysis is adopted.
Urama said, “This collaborative model ensures resources are directed to where they are most needed.”
He said adopting systemic financial reforms will help drive economic growth, create jobs and boost government revenues on the continent.
Senate approves Tinubu’s $2.2 billion loan request to fund 2024 budget deficit
Meanwhile, TheRadar reported that the Nigerian Senate approved President Bola Tinubu’s loan request of $2.2 billion to partially finance the N9.7 trillion budget deficits for the 2024 fiscal year.
The approval followed the presentation of a report by the Chairman of the Senate Committee on Local and Foreign Debts, Aliyu Wamakko, during plenary on Thursday, November 21.
