As African countries push for a significant rise in green finance at COP29 the international community must keep the continent’s debt crisis front of mind. Africa already spends nearly three times more servicing debt than it receives in climate finance. So – as Karabo Mokgonyana points out in this excellent piece – without debt relief, Africa is fighting climate change with its hands tied.
The IMF and major creditor nations don’t seem to grasp the urgency of the situation. GenZ protests across Africa only three months ago, in which young people carried placards berating the IMF, seem to have been forgotten.
This damming summary by the Bretton Woods Project of what wasn’t achieved at the IMF/ World Bank annual meeting a couple of weeks ago includes the news of no real breakthrough on debt restructuring.
“…The IMF continues to present debt dynamics as a ‘liquidity’ issue rather than an insolvency crisis, refusing to inject more reserves into the global system via a new Special Drawing Rights. The path to meaningful debt restructuring for fiscal relief is further complicated by the reluctance of countries in debt distress to enter restructuring processes for fear of losing market access, incurring higher borrowing costs and harming growth and investment, amid the lack of a well-functioning debt workout mechanism and fears of IMF over-reach.”
Policymakers have taken their eye off the demographic time bomb ticking in the world’s youngest continent. Those of us in Nairobi are keenly aware that the clock is ticking.
A brief reminder: in July and August this year GenZ took to the streets in Kenya, and then Uganda and Nigeria lighting the fuse on a demographic time bomb that has been building across sub-Saharan Africa for years. 70% of sub-Saharan Africans are under the age of 30 and the majority is unemployed. Three quarters of those who do work are in jobs which are insecure. Meanwhile the cost of living is soaring and young people have had enough.
Informed online and united by social media across ethnic and class divides, GenZ-ers (born between 1997 and 2010) mobilised against governments which they perceive to be corrupt and ineffective, and a foreign debt burden which they refuse to pay for. Many of the placards held aloft by young protestors in Nairobi back in June railed against the IMF.
African leaders looked on nervously as President Ruto withdrew a controversial Finance Bill and admitted he needed to show more empathy for the plight of his fellow citizens. Revolution was in the air and we all wondered if an African Spring was in the offing.
It hasn’t happened, yet. But the rule book has been rewritten and the fundamental drivers of discontent remain: joblessness and a growing debt crisis. As this piece in the @NewYorkTimes – Africa’s Debt Crisis Has ‘Catastrophic Implications’ for the World – explains:
“The continent’s foreign debt reached more than $1.1 trillion at the end of last year. More than two dozen countries have excessive debt or are at high risk of it, according to the African Development Bank Group. And roughly 900 million people live in countries that spend more on interest payments than on health care or education.”
(To put that in perspective, in 2022/23 the UK spent roughly 8% of GDP servicing government debt and 65% on day-to-day public services like education and the NHS.)
The World Bank has labelled it a silent sovereign debt crisis: 28 developing economies, the majority in Africa, home to 16% of the world’s population and with the weakest credit ratings have an average debt-to-GDP ratio of nearly 75%. But their collective economic activity constitutes a mere 5% of global output so it’s very easy for the world to ignore the problem.
These economies urgently need help from abroad – in the form of debt relief and restructuring. At their Autumn Annual Meeting the IMF failed to take the bold steps needed to start delivering that relief. Their snazzy Facebook video, promoting the meeting, describes a world “filled with opportunity and resilience and an economy that can work for everyone.” For millions of young Africans this is not how the world looks. COP29 must put that right.