INTERGOVERNMENTAL bodies this week called on African nations to take ownership of their debt and collaboratively find a solution as countries sink deeper into debt distress.
Information unveiled at the ongoing African Development Bank (AfDB) annual meetings in Kenya showed that Africa was at a critical juncture where nations are faced with difficult trade-offs concerning debt.
This trade-off has led to 60% of African countries spending more on servicing their debt than on healthcare, according to data unveiled at the annual meetings.
Further, African nations are now spending more servicing debt than acting on climate change, which continues to ravage agro-based economies. The revelation comes at a time when Zimbabwe is in debt distress, owing over US$20 billion.
AfDB president Akinwumi Adesina and former Mozambican president Joaquim Chissano are leading debt resolutions talks on behalf of Zimbabwe.
“We’ve been talking more about the debt resolution framework and there is also a legal framework that is very important such as the climate resilience debt clauses,” United Nations Economic Commission for Africa deputy executive secretary Hanan Morsy said during the proceedings at the annual meetings on Tuesday.
“Basically, it’s a way by which if you’re faced with climate shock, you can be given a breathing space to deal with that rather than having to continue to pay your debt service while you are in the midst of serious problems.”
“There have been a number of countries that have committed to going that route, but we need to make it more universal. And another important issue, of course, is for us to ensure that at a domestic and national level, we push debt to good use. I cannot emphasise this more, because at the end, the debt is as good as you invest it in,” Morsy said.
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“So, if you invest it in users that generate long-term high returns, there will be no problem in getting it back. The issue is where it’s not used efficiently and wisely and then that creates a vicious circle because then basically you have to borrow more just to pay back what you’ve borrowed, which is not sustainable. And here, we need to have the ownership at the national and domestic levels to have a mechanism to ensure that accountability happens.”
Morsy said the continent needed to focus on tackling the core cause of debt by ensuring lower cost of finance and affordable finance at scale.
To do that, she added, there was a need for bigger and better multilateral development banks that are capitalised.
African Union Economic Development, Trade, Tourism, Industry and Minerals commissioner Albert Muchanga said it was important to find out how the debt situation was affecting the continent.
He added that there was need for discipline among African nations and promote borrowing for production.
“We need all hands on deck to resolve this. African finance ministers should take the lead and ensure collaborations that work for the betterment of our situation,” Muchanga said.
African Legal Support Facility chief executive officer and director Olivier Pognon said African countries needed to develop legal and regulatory frameworks that support effective debt management.
“Such frameworks should describe the steps necessary to establish the authorisation to borrow, undertake specific debt transactions, and issue government guarantees on behalf of the central government,” he said.
Pognon added that there was a need for a specification of the approved types of financing and debt instruments available to the sovereign and the proper enforcement mechanisms.
