Rwanda President Paul Kagame (L) and Kenya’s William Ruto speak at the presidential panel during the 2024 AfDB AGM in Nairobi, Kenya on May 29, 2024. PHOTO | POOL
African leaders have finally laid out the blueprint for the financial architecture that
many of the continent’s political bigwigs and economists have been calling for, clearly painting the picture that has been at best a silhouette in recent years.Over the past two years, leaders on the continent, as well as civil societies and economic think tanks, have raised concerns over how the international financial architecture is designed, saying it does not work for Africa.
The concerns arose in the aftermath of the recent multiple global crises that drove many African economies to their knees, with many sliding into a high risk of debt distress or default altogether, and government borrowings hitting record highs for many nations.
Africa’s debt stood at $1.152 trillion as of December 2023, which is about half of the continent’s GDP, according to latest figures by the African Development Bank (AfDB). This has been heightened by recent economic shocks.
Read: Debt, pending bills batter Africa economies in 2024
“The issue is, African countries are facing a lot of challenges, in particular, the issue of liquidity. And this comes up because a number of shocks have hit African countries, starting with the Covid-19 pandemic and lockdowns, and then the Russian-Ukraine war,” explains Prof Victor Murinde, executive director of the African Economic Research Consortium (AERC).
According to the AfDB, this year, African countries will have to cough up $163 billion to service their debts, almost triple the $63 billion they paid 14 years ago in 2010, an indication of the burgeoning African debt burden.
This is what birthed the new architecture debate across the continent and, this week, at the African Development Bank (AfDB) Annual General Meetings, leaders laid out their demands for the new financial architecture.
Kenyan President William Ruto, who just announced an additional $100 million investment in AfDB, Afrexim Bank, and the Trade and Development Bank, said the idea is to increase concessional financing to Africa.
According to him, the new financial architecture should have four key features: Long-term financing of up to 40 years, low interest rates or even non-returnable grants, wider access to financing, and flexibility, that is, financing that is ‘climate-sensitive’.
The AfDB agrees. In their blueprint for the new financial architecture published ahead of the just-concluded meetings, the Pan-African lender said the new system should prioritise giving African sovereigns longer repayment periods for loans, an increment on the pool of finance accessible by Africans.
Read: Go slow on Eurobonds, UN agency urges distressed African economies
“The call for reforms of the global financial architecture is necessary to mobilise even more financial resources to achieve Africa’s sustainable development goals,” said AfDB president Akinwumi Adesina.
Rwandan leader Paul Kagame said the new architecture needs to have Africa’s interests.
“For us in Africa, we are hard-pressed to see that there is change in the design of these institutions, but maybe the way the institutions are set up benefits some parts of the world,” said President Kagame at the presidential panel discussion.
The continent’s academics have also shown the need for these reforms, giving research-based evidence on how far the changes will go in transforming real people’s lives on the continent.
With the proposals, it is now up to the Bretton Woods institutions, and the governments of the G20 countries – which are the leading bilateral lenders to African countries – to implement them
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