ECA, AfDB express worry over rising debt

Say it limits essential investments, trade
African Development Bank (AfDB) President, Akinwumi Adesina, and the Deputy Executive Secretary and Chief Economist of the Economic Commission for Africa (ECA), Hanan Morsy, have lamented the high costs of debts incurred by African governments adding that it was limiting countries’ ability to make essential investments in health, education and infrastructure to help operationalise the African Continental Free Trade Area (AfCFTA).

Revealing that debt servicing composes almost half of the revenue in Africa, Morsy underscored the urgent need to fix the global debt architecture so that countries in debt distress can obtain swift and effective debt restructuring.

Making this known during a meeting with heads of African regional and continental institutions, she highlighted some of the near-term reform proposals suggested by the High-level Working Group on Global Financial Architecture (HLWG), including the need to suspend debt service for all countries entering the Common Framework restructurings to provide relief and incentivise speedy restructurings, expand eligibility to middle-income countries, establish expanded creditor committees to incorporate private sector creditors, smooth coordination challenges and accelerate restructurings, establish a ‘Comparability of Treatment’ formula to reduce technical disputes and accelerate restructurings further and enhance the use of International Monetary Fund (IMF) Lending into arrears policies to reduce the leverage of holdout creditors.

Noting that credit enhancement tools and guarantee facilities would also help unlock more resources for investments, she said such mechanisms could be combined with debt-for-climate investment swaps, which allow for reducing countries’ debt servicing costs and create fiscal space.

Speaking, Adesina said on the issue of debt resolution, the AfDB and ECA would continue to work hard to ensure that Africa has a common voice.