Debt Reform For Africa Imperative Now-Ameenah Gurib-Fakim

By Ajong Mbapndah L*

With Africa been at the epincentre of the global debt crisis and home to the highest concentration of highly indebted countries, former Mauritius President Ameenah Gurib-Fakim says it is of critical interest for the continent to find solutions. Fielding questions from PAV after a meeting of the African Leaders Debt Relief Initiative- (ALDRI), Ameenah Gurib Fakim says debt relief for highly indebted countries, along with efforts to lower the cost of capital for all African countries, is critical to creating the fiscal space and enabling Africa to invest in climate-resilient green growth for the continent.

“With South Africa hosting the G20 Presidency in 2025 and putting debt relief on the agenda, the African Union being part of the G20, and a campaign for a Jubilee Year 2025 getting underway with the support of Pope Francis, there is a unique opportunity for African leadership to champion essential reforms in the international architecture on debt and finance,” says Ameenah Gurib Fakim.

Ameenah Gurib Fakim who has remained a champion of noble development courses across Africa since leaving office, uses several metrics to argue that the status quo is untenable.

“External debt levels have increased by 240% between 2008-2022 due to external shocks from climate impacts, energy and food price spikes, and the hiking of interest rates by central banks in advanced countries. Half of African nations are now spending more on interest payments alone than on their public health budgets. Debt owed to private bondholders which is particularly expensive soared from 25$ Billion in 2008 to 187Bn$ in 2022. Since 2020, four African nations have defaulted, and the number of regional economies effectively barred from international capital markets has grown from one in 2010, to 11 in 2024,” says the former Mauritius President.

Far from been an African problem, President Ameenah Gurib Fakim posits that a more productive Africa with its ample resources of renewable energies, minerals and land could become a critical part of global sustainable development.

Could we start with some background context on the African Leaders Debt Relief Initiative (ALDRI), - why was it created and what is its mission?

Many African countries are now in the throes of a sovereign debt crisis. They are spending more on servicing their debt than on critical development issues like education, health, or on investment in future growth. For a large group of countries, the yield on government bonds is now higher than expected economic growth rates, making it harder to break free from the debt trap. Each bond issuance drives them deeper into debt. Debt relief for highly indebted countries, along with efforts to lower the cost of capital for all African countries, is critical to creating the fiscal space and enabling Africa to invest in climate-resilient green growth for the continent.

The African Leaders Debt Relief Initiative (ALDRI) recently came out with the Cape Town Declaration calling for bold and urgent action on a comprehensive plan for debt relief for Africa, why the call and why the call and urgency at this point?

Africa is at the epicentre of the global debt crisis and is home to the highest concentration of highly indebted countries. As a result, Africa has a critical interest in finding a solution to the debt crisis. With South Africa hosting the G20 Presidency in 2025 and putting debt relief on the agenda, the African Union being part of the G20, and a campaign for a Jubilee Year 2025 getting underway with the support of Pope Francis, there is a unique opportunity for African leadership to champion essential reforms in the international architecture on debt and finance

You and the other leaders maybe privy to figures that are oblivious to many Africans, are there any vital stats you may want to share on how indebted Africa is and to who?

External debt levels have increased by 240% between 2008-2022 due to external shocks from climate impacts, energy and food price spikes, and the hiking of interest rates by central banks in advanced countries. Half of African nations are now spending more on interest payments alone than on their public health budgets. Debt owed to private bondholders which is particularly expensive soared from 25$ Billion in 2008 to 187Bn$ in 2022. Since 2020, four African nations have defaulted, and the number of regional economies effectively barred from international capital markets has grown from one in 2010, to 11 in 2024.

At least 34 African countries will need significant debt relief to unlock the necessary funding for the United Nations 2030 Sustainable Development Goals and Paris Agreement targets, alongside other forms of low cost and concessional financing. Low-cost finance alone will not be enough to close their funding gap.

How did Africa find itself in the current debt predicament, who bears the blame- is it the African leaders including some who are part of the ALDRI, or it is the international system that some argue is designed to keep Africa in debt?

Current debt predicament stem since the independence of many African countries. Also, over the past 15 years, many poor countries have been encouraged to borrow from the bond market at a time when interest rates were low due to quantitative easing policies in the leading developed economies.

At the beginning of the 2020s, a number of external shocks drove countries much deeper into debt: First the COVID-19 crisis which hit many poor countries particularly hard. Then the global price shock of energy and food in the context of the war in Ukraine, driving many countries to the brink of insolvency.

Central banks tightened money supply to fight inflation, and interest rates climbed. And the climate crisis has hit vulnerable countries particularly hard. Many countries are therefore in a spiraling debt crisis and unable to break out of this debt trap. Unfortunately, the international, current international financial infrastructure is not conducive towards helping poorer countries.

In the Cape Town Declaration, you and the other former leaders say debt relief is not charity but an investment in a prosperous, stable, and sustainable future—for Africa and the global economy, can you shed some light on this?

There is a global demographic shift happening worldwide. Many of the rich countries have an ageing population and are in need of a younger work force to drive and sustain their economies. Yet, political parties decry immigration. The African continent is already the youngest continent with a median age of 17 years in some regions.

By 2050, 1 in 4 of working age adults will be African. But investment is lacking due to excess debt. In the absence of productive investment, infrastructure and education, many of these young, creative and entrepreneurial young people are not able to contribute fully to global growth and development.

A more productive Africa with its ample resources of renewable energies, minerals and land could become a critical part of global sustainable development. It is a win-win for all.

On proposals what are some of the concrete measures or recommendations that the ALDRI is proposing as palliatives to Africa’s debt crisis?

Several proposals have been put forward to the international community so that debt relief is aligned with broader sustainability goals. A climate-sensitive debt sustainability analysis by World Bank and IMF would be the first step to identify and distinguish between countries that need debt relief and countries that do not need debt relief but rather liquidity support. For the group of countries in need of debt restructuring and relief, meaningful debt relief needs to be provided.

The participation of all creditor classes, including private bond holders in debt restructuring, is critical. Also, countries receiving debt relief need to commit to using freed up fiscal resources in line with their Nationally Determined Contributions to the Paris Agreement and implementation plans for the SDGs.

They will need to subscribe to establishing full public debt transparency and enhancing public debt management standards. Also, non-distressed countries facing liquidity constraints should be provided with credit enhancements and further support to reduce their capital costs and access to liquidity.

Besides the issuance of new Special Drawing Rights (SDR) and the rechanneling of SDRs from advanced countries, efforts need to be reinforced to provide new concessional finance by MDBs. Instruments like debt for climate/nature/development swaps and credit enhancements for new sovereign sustainability linked bonds can complement such efforts.

The Cape Declaration is coming at a time when US President Donald Trump has inadvertently triggered a debate on aid to Africa, where do you stand on this, should a continent with the size and potential of Africa be counting on aid and handouts to lead it to emergence in 2063?

There is no doubt that Aid has helped Africa in some areas. I think of the Health sector with PEPFAR and the availability of antiretrovirals. However, a continent of the size and potential as that of Africa must go beyond Aid.

She must draw on the talents of her people, her own abundant natural resources that must be carefully stewarded to drive her development and issues like corruption and governance must also be addressed.

When you look at the continent and see the slow implementation of initiatives like the AfCFTA, when you see how frustrating it still is for Africans to travel from one country to another, when you look at the crisis in the DR Congo, in Sudan, South Sudan, do you personally and others in the ALDRI get the feeling that beyond debt reduction Africans need to seriously look inward for solutions to shape the better future that its people deserve?

It is easy to slam the slow integration of African countries through the AfCFTA which has been implemented only a couple of years ago. When one looks at Europe, it took over 50 years to reach a certain level of integration. Trade is already happening in regional blocks like SADC etc and which remain powerful initiatives to promote regional integration. Africa also is also a victim to her own abundance and the crisis in the countries you mentioned are symptomatic of that.

The Cape Declaration comes at a time when South Africa and President Ramaphosa will be taking over the Presidency of the G20, what does this mean for the continent and beyond debt relief, what are some issues you think should define the mandate?

Already it is historical that the G20 is meeting in Africa for the first time. The G20 after all represents over 80% of the world economy and its membership includes key global leaders. It is the forum where issues like climate crisis, debt, inequality, better returns for the exploitation of African resources must addressed.

Only eight former African leaders signed the Cape Declaration, does this mean that the issue is not of interest other leaders and beyond declaration what more will the ALDRI be doing to ensure that the debt issues and others you are interested in get deserved attention?

The issue of debt matters to all leaders past and present on this continent. ALDRI is a very young initiative. We are at the beginning of our mission and our work has just started. I am sure ALDRI will garner more members and more interest on how best to alleviate the debt burden.

*Culled from April Edition of PAV Magazine