Let’s reform global financial infrastructure to address Africa’s debt burden

The President of the African Development Fund (AfDB), Dr Akinwumi A. Adesina, has called for reforms in the global financial architecture to address the growing debt burden on Africa.

According to him, the current global financial architecture did not favour Africa and made the continent to borrow at a very high cost on the international capital market, thus exacerbating the continent’s debt crisis.

Dr Adesina made the call in a speech read on his behalf by the Country Manager of the AfDB, Ms Eyerualem Fasika, at the 8th Ghana International Trade and Finance Conference (GITFiC).

The day’s programme was on the theme “A call for a new Global Financing Pact: Collaborative pathways to economic resilience and global prosperity.”

It was attended by representa­tives from Economic Community of West African States (ECOW­AS), Southern Africa Develop­ment Commission (SADC), East Africa Commission, Central Africa and the Diplomatic Community representing various governments.

Speaking on the topic “Rede­signing Global Financial Frame­works: Collaborative Approach­es to Economic Stability and Growth – A perspective from the African Development Bank,” Dr Adesina said despite data showing that debt default rates in Africa were lower than in other parts of the world, countries in Africa paid more when they accessed the international capital market.

According to him, African countries paid 500 per cent more in interest costs when borrowing from the international capital markets than their counterparts in the West, despite that Africa also had the lowest debt default rate at just 1.9 per cent compared to that of Eastern Europe, 12.4 per cent, Latin America, 10.1 per cent, North America, 6.6 per cent, and Asia, 4.6 per cent, and Western Europe, 4.6 per cent.

“The implication is that while developed countries can sustain high-level debts with low debt ser­vice burden, developing countries, particularly the most vulnerable among them, are devoting an in­creasing large proportion of their fiscal resources to servicing public debt,” he stated.

The President of AfDB said a new global financing pact was necessary to relief Africa of debt, saying the reformed global debt architecture should be more trans­parent, responsive, accessible, and affordable to developing countries.

He also said the reformed global debt architecture needed to increase concessional financing to countries in Africa.

The General Director of the United Nations Economic Com­mission for Africa, Mrs Ngone Diop, who spoke on the topic “The Call for a new global finan­cial pact: Leaving no one behind,” called on the private sector, civil society and governments in Africa to work together and advocate for a fair global financial architecture for Africa.

“You all have roles to play, be it private sector, civil society, and government, you name them. By owning the analysis, by under­standing the international and the technical development, we will be able to amplify and take action as well,” she stated.

The Chief Executive Officer of GiFTIC, Mr Selasi Kofi Ackom, speaking on the topic “Overview of the Call for a Global Debt Initiative,” said the conference was to bring together key stakeholders and thought leaders to address the critical issues such as debt, which is shaping the global financial architecture.

He said Ghana’s international creditors should consider the ap­proach taken during the Enhanced HIPC era where debt relief helped restore economic stability.

He said GITFiC, was committed to driving the conversation for debt relief for Ghana and Africa, saying “We are engaging policy­makers, the private sector, and in­ternational organisations to ensure that this call for a Global Debt Initiative translates into concrete.