On the 5th of December 2022, the Friedrich Ebert Stiftung AU Cooperation Office in collaboration with the United Nations Conference on Trade and Development (UNCTAD) has organized a side event on the occasion of the 13th UNCTAD International Conference on Debt Management under the auspicious of ‘Getting Africa into the Driver’s Seat in the Global Debt Discussion’. The session has brought together experts from the African Union, officials from the UN/AU member states and representatives from the CSO’s and academia.
Debt troubles in Africa were already brewing long before COVID and the rapid build-up in debt over the past decade has been consistently underestimated. The session analyzes the past and recent debt relief and re-structuring initiatives and highlights lesson learned, outlines challenges and limitations from the overall process. There was a consensus from the panel that the past and current debt relief and re-structuring programs didn’t consider the debtor countries demand, interest and more importantly, the kind and the amount of finance they need to spur growth and bring a structural economic transformation. As it has been witnessed in the last two decades, there is an increased appetite by the African countries to finance their development program and mainly to address the infrastructure gaps, and this in turn has prompted many African countries to look for alternative source of finance and development partners. To meet those obligations, many African countries have continued to borrow in unpreceded level, and that has led to higher level of indebtedness.
In order to offset that, several debt relief and re-structuring programs were rolled out, but with a limited success. The session highlights the relief programs are designed to address one specific challenge at one given time and they are not meant to affect a structural change. In addition, the negotiation and the overall political process is somehow monopolized by the creditors countries and thus, African’s have a limited policy space to reflect their demand. The panel recognized the need to envision and go beyond the relief programs and African’s to be proactive in articulating and having a grandeur position towards the mounting debt problem. During the exchange, the panel highlighted Debt restructurings in DSSI countries are likely to become more frequent and will need to consider the increased diversity of the creditor landscape in these countries. Having in place mechanisms that ensure coordination and confidence among stakeholders has become urgent. Improvements in the G20 Common Framework could also play an important role in this objective.
In conclusion, participants have forwarded several recommendations on how to move forward with the challenge and to name some: A follow-up and joint discussion by the AU and member states, the importance to look beyond external funding (curbing Illicit Finical Flows and domestic resource mobilization), a political commitment by member countries to reform and adopt strict debt management, introducing a specific clause to protect developing countries in the advent of crisis and finally, pushing for a reform of international taxation system.
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