Borrowing is an indispensable tool for financing development in physical and human capital crucial to the attainment of the Sustainable Development Goals (SDGs) and Agenda 2063: The Africa We Want. Additionally, sovereign borrowing permits government finance to perform a countercyclical role throughout economic cycles; the importance of this cannot be more overemphasized by recent multiple and overlapping shocks.
Between 2000 and 2020 alone, Africa's external debt increased more than fivefold and accounted for almost 65 percent of its GDP in 2022. Even though Africa’s average debt-GDP ratio is expected to decrease to 62.7 percent in 2023 and then stabilize at around slightly above 60 per cent in 2024, Africa faces an escalating debt crisis. Three years after the COVID-19 outbreak, the debt crisis facing low-income and also many middle-income developing nations continues to deepen despite various domestic and international efforts. Public finances are becoming overstretched due to rising debt interest costs, more costly imports of food and energy and currency depreciation, amongst other issues, caused by multiple and intersecting shocks. Rising public debt, exacerbated by low tax revenues, high interest rates and the feuding of world superpowers over debt relief, is a key impediment to development and achievement of the SDGs as it limits governments' ability to invest in essential services such as health care and education. As an example, Africa currently spends more on debt service costs than on health care.
Due debt service payments, clustered in 2023–2025, may further increase vulnerabilities and risks. These payments, as cited by various sources, may range from United States Dollar (USD) 23 billion to USD 69 billion in 2023, with private creditors accounting for over 40 percent of African debt, while bilateral creditors make up 26.6 percent and multilateral creditors 32.5 percent. ECA (2022) estimates that, in 2023, the principal repayment of at least USD2.7 billion on Eurobonds issued by African countries will be due, on which a premium of approximately 2 percent is paid compared to other regions.
In many heavily indebted nations, debt restructuring is therefore necessary to bring debt burdens back to sustainable levels and limit the negative impact of greater debt servicing on what is already a fragile socioeconomic environment. Historically, debt relief has come ‘too little too late’, therefore pre-emptive debt restructuring would help to avoid a debt crisis with disastrous socioeconomic repercussions and provide additional fiscal space as countries recover from past and current overlapping shocks and build resilience thereto.
This call is echoed in the set of nine principles of the debt restructuring processes, particularly the principal on sustainability, contained and endorsed in a United Nations (UN) resolution on 10 September 2015, following years of negotiations and deliberations on sovereign debt restructuring processes. These principles are also in line with the UN guiding principles on foreign debt and human rights.
Date: 03 – 05 October 2023
Time: 09.00 – 17.00 (East Africa Time UTC +03.00)
Venue: Hybrid
Contact:
Lerato Mary Litsesane lerato.litsesane@un.org
Solomon Wedere wedere@un.org
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