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Africa’s Debt Crisis Needs a Bold New Approach– & a Way Forward

A mobile money stand in Accra, Ghana. Credit: IMF/Andrew Caballero-Reynolds

By Danny Bradlow
PRETORIA, South Africa, Feb 28 2024 – It hasn’t been easy for African states to finance their developmental and environmental policy objectives over the past few years.
Recent events suggest that the situation may be improving. For the first time in two years, three African states have been able to access international financial markets, albeit at high interest rates. Kenya, for example, is now paying over 10% compared to about 7% in 2014.

Many African countries continue to face challenging sovereign debt situations. Total external debts as a share of Africa’s export earnings increased from 74.5% in 2010 to 140% in 2022.

In 2022, African governments had to allocate about 12% of their revenues to servicing their debt. Between 2019 and 2022, 25 African governments allocated more resources to servicing their total debts than to the health of their citizens.

And in late 2023 the International Monetary Fund estimated that over half the low income African countries were either potentially or actually experiencing difficulties paying their debts.

This suggests that it will be very difficult for Africa to raise the US$1.6 trillion that the Organisation for Economic Cooperation and Development (OECD) estimates it needs to reach the sustainable development goals (SDGs) by 2030.

One of the lessons of the COVID pandemic and the climate negotiations is that Africa can’t count on the global community to provide it with sufficient new funds or with debt relief to deal with either its development needs or the consequences of crises such as pandemics or extreme weather events.

Its official bilateral creditors appear more focused on their own needs and on other parts of the world than on Africa. Commercial creditors are happy to provide financing when conditions are favourable and African debt can help them satisfy their investment mandates.

But they are less forthcoming when the going gets tough and the risks associated with the transaction – and for which they have been compensated – actually materialise.

This suggests that Africa needs to advocate more aggressively for its own interests. This year offers some good opportunities to promote a more effective approach to African debt.

Careful planning needed

There are two international conferences where global economic governance will be on the agenda. This is also the first year that the African Union participates as a full member in the G20. In addition, South Africa, the G20 chair in 2025, currently serves on the troika that manages the G20 process. (G20 Finance Ministers are scheduled to meet in Brazil 28-29 February).

Debt and development finance will be an important topic in all these forums. African representatives can use their participation to advocate for a new approach to sovereign debt that is more responsive to African needs and concerns. They can also lobby other participating states and non-state actors for their support.

But African states will need to plan carefully. Their starting point should be the well recognised fact that the current sovereign debt restructuring process is not working for anyone. The G20 agreed a Common Framework that was supposed to help resolve the sovereign debt crises in low income countries.

Four African countries applied to have their debts restructured through the framework. Despite years of negotiations, it has failed to fully resolve the debt crisis in three of them.

Countries outside the Common Framework, such as Sri Lanka, have not managed to fully resolve their debt crises either. This is costly for both debtors and creditors. It is therefore in everyone’s interest to look for a new approach.

This requires all parties to be willing to entertain new ideas and to experiment with new approaches to old problems. African states should offer their own innovative proposals. They should also state that they are willing to take on new responsibilities if their creditors are willing to do the same.

They can remind their creditors that these experiments would not be taking place in a vacuum. They can be guided by the many existing, but under-utilised, international norms and standards applicable to responsible sovereign debt transactions, for example the Unctad principles on responsible sovereign debt transactions. Some of these relate to the conduct of sovereign borrowers.

Others focus on responsible lending behaviour and are often cited by creditors in their own policies dealing with environmental and social issues, social responsibility or human rights.

By basing any new approach on these international norms and standards, both debtors and creditors will merely be agreeing to implement principles that they have already accepted.

Working from this starting point, African states should make three specific proposals.

Concrete proposals

First, they should commit to making both the process for incurring debts and the terms of all their public debt transactions transparent.

This will ensure that their own citizens understand what obligations their governments are assuming on their behalf. It will encourage governments to adopt responsible borrowing and debt management practices.

They should also agree that they can be held accountable for their failure to comply with these transparent and responsible sovereign debt practices and procedures.

Second, African states should point out that there is a fundamental problem with a sovereign debt restructuring process that only focuses on the contractual obligations that the debtor state owes its creditors.

This focus means, in effect, that servicing its debt obligations will trump the debtor state’s efforts to deal with the country’s vulnerability to climate change and the loss of biodiversity, and with its poverty, inequality and unemployment challenges.

This follows from the fact that their creditors can use the restructuring process to force sovereign borrowers in difficulty, unlike corporations in bankruptcy, to pay those who lend them money without regard, for example, to the impact on their obligations to pensioners, public sector employees or the welfare of their citizens.

This exclusive focus on debt contracts is inconsistent with the international community’s interest in addressing global challenges like climate and inequality.

This problem can be resolved if both creditors and debtors agree that they will adopt an approach to debt negotiations that incorporates the financial, economic, social, environmental, human rights and governance dimensions of sovereign debt crises.

Third, African states should propose that their creditors publicly commit to base the new approach to sovereign debt on an agreed list of international norms and standards relevant to responsible international financial practices.

These will include those dealing with transparency, climate and environmental issues, and social matters, including human rights.

Source: The Conversation

Danny Bradlow is Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of Pretoria.

University of Pretoria provides funding as a partner of The Conversation AFRICA.

IPS UN Bureau

 


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‘I Haven’t Forgotten Where I Came From,’ says Yvonne Pinto, Incoming IRRI Chief

Yvonne Pinto, the incoming Director General of the International Rice Research Institute, at the 5th All Africa Horticulture Conference in Marrakesh, Morocco, February 26 to March 1, 2024. Photo Credit: Supplied by Yvonne Pinto

Yvonne Pinto, the incoming Director General of the International Rice Research Institute, at the 5th All Africa Horticulture Conference in Marrakesh, Morocco, February 26 to March 1, 2024.
Credit: Supplied by Yvonne Pinto

By Neena Bhandari
SYDNEY, Feb 28 2024 – Growing up on a small farming station in Holetta (Ethiopia), Yvonne Pinto would accompany her agriculturist father to the farm, where she would spend her time cross-fertilizing plants. Her tiny fingers making the task easier, as she would marvel at the end product of a prospective new and higher yielding variety. These formative years laid the foundation for her career in agricultural science.

Ethiopia in the late 1970s and 1980s was ravaged by a terrible famine, drought, civil war, and international conflict. It became clear to Pinto from the outset that such exigencies could rapidly deteriorate everyday life and the absence of food could decimate a population. These events instilled in her a deep appreciation for the role agriculture and food systems play in human survival.

“I haven’t forgotten where I came from,” says Pinto, the incoming Director General of the International Rice Research Institute (IRRI). A second-generation Kenyan by birth, she feels privileged to have been brought up in Ethiopia, a country that was never colonized and where she felt fortunate to grow up as an equal, a rare experience then.

The small farming station in Holetta, about an hour’s drive from the Ethiopian capital Addis Ababa, is now the National Agricultural Biotechnology Research Centre. She says, “My father was its first director. From the mid-1960s, he was instrumental in the establishment of the Ethiopian Institute of Agricultural Research and the creation of the Ethiopian Seed Corporation in 1978. I’m undoubtedly a product of those institutions and influences. My father has been my champion.”

She has continued to work with people from those institutions, and while it’s important for her to add value and make a contribution where she can, Pinto affirms, “It is also very important to enhance the contribution of others because having bright and capable people contribute to ideas, approaches, and solutions is often the difference between success and failure.”

On April 22, 2024, she will take over as the Director General of IRRI, where she started her working life as a visiting research scholar in 1985, when eminent agricultural scientist and geneticist Dr M S Swaminathan was the institute’s director general.

“My time at IRRI, which is referred to as the jewel in the crown of the CGIAR system, and encouragement from my supervisors clearly influenced my decision later in life to do a PhD in rice,” adds Pinto, who will be the first woman to lead the institute, which is dedicated to abolishing poverty and hunger among people and populations that depend on rice-based agri-food systems.

She says, “There are opportunities now for girls and women that weren’t present in the past. There’s an interesting societal transition happening in the world, gaining momentum through the COVID-19 pandemic and the Black Lives Matter movement to the growing focus on equity, inclusion, and diversity. I’m actually a product of that change and thinking.”

Out of the hundreds of congratulatory messages she received on her appointment, “One-third of them were girls and women. All I can say to them is that if I can do it, you can do it,” says Pinto, who also drew inspiration from her mother, a medical surgeon.

In Africa, where rice cultivation is the principal source of income for more than 35 million smallholder rice farmers, women provide the bulk of the labour, from sowing to weeding, harvesting, processing, and marketing, according to the Africa Rice Centre.

Acknowledging the challenges faced by small and middle-income rice farmers, she emphasizes the need to ensure that farmers receive fair returns on their investment.

“Smallholder farmers are reliant upon the private sector or non-governmental organizations to receive the material, such as seeds and other agriculture inputs. In rice and rice seed systems, for example, there are a number of private sector players who are involved. We have to have very intelligent Intellectual Property (IP) arrangements with the private sector to ensure that our farmers have affordable access to these materials and they are not disadvantaged in the process,”  says Pinto, who will also serve as the CGIAR Regional Director for South-East Asia and the Pacific and Country Representative for the Philippines.

Unlike in most Asian countries, where economic growth and increasing urbanization have led to a decline in rice consumption, in African countries, consumption has significantly increased. Demand for rice is growing at more than 6 percent per year, which is faster than for any other food staple in sub-Saharan Africa, according to the Africa Rice Centre.

Looking ahead, Pinto envisions IRRI playing a pivotal role in promoting circular agricultural practices in rice production and underpinning the importance of rice in human health and nutrition.

She says, “We have tremendous opportunities to create more nutritious and resilient rice varieties capable of withstanding climate change, benefiting both farmers and consumers alike. There is an opportunity to enable IRRI’s germplasm, not only to influence and impact the Asia-Pacific region but to support other rice producing and consuming countries, notably in Africa”.

Rice is now the second-most important source of calories after corn in many sub-Saharan African countries. The region’s total rice consumption is projected to grow to around 36 million tons by the end of 2026, and the region is expected to import over 32 percent of globally traded rice by 2026, mainly from India, Pakistan, Thailand, and Vietnam, according to a United States Department of Agriculture (USDA) report.

Reflecting on her extensive experience chairing boards and committees worldwide, she says effective leadership hinges on “fostering connections, building trust, and nurturing partnerships and collaboration, as leadership is a collective responsibility within an interconnected ecosystem.”

Pinto is poised to drive impactful change in agricultural research, advancing food security and sustainability.

IPS UN Bureau Report

 


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