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The Summit for a “New Global Financial Deal” held from 22 to 23 June 2023 in Paris, France. The aim is to help developing countries finance the fight against climate change, while continuing efforts to reduce poverty. On this exceptional occasion, French President Emmanuel Macron, host of the meeting, has invited a hundred or so world leaders, including Moussa Faki Mahamat, Chair of the African Union Commission, his counterpart Ursula von der Leyen of the European Union Commission, and others. In the run-up to this international summit, economist Carlos Lopes explains what is at stake for Africa at a time of climate change and the burden of debt.
At COP27 in Egypt, French President Emmanuel Macron announced the Summit for a “New Global Financial Deal”, which is finally being held on 22 and 23 June 2023. The event aims to restore fiscal space to countries facing difficult short-term situations, particularly for the most indebted countries. Is this just another event, or can it really produce concrete proposals to relieve the burden of debt on developing countries?
Carlos Lopes: I think that 2023 will see major changes in the international financial architecture, as geopolitics and the climate emergency are at the centre of paradigm shifts. There has never been so much talk at decision-making levels about the need for reform, including of the Bretton Woods institutions. We have gone from a taboo to a race to see who can say more, for want of progress on who can do more.
This is the context in which the Paris Agora should be held. We will move forward a little, we will draw more, but it will not be the Summit of the last word or the moment of the turning point. Especially as regards the problem of public debt.
Since the beginning of the Covid-19 era, two African countries, Ghana and Zambia, have defaulted on their debts. This demonstrates the fragility of certain African economies, which had a stock of debts of 790 billion dollars in 2021 in sub-Saharan Africa. And these countries are still taking on debt. Can Africa break out of this vicious circle?
Public debt is not just an African problem, quite the contrary. Let’s stop this artificial division of sub-Saharan Africa. This is a global problem in which Africa as a whole plays a very small role – a debt as big as that of Belgium and the Netherlands combined. We have some of the lowest debt-to-GDP ratios in the world, certainly much lower than those of members of the Organisation for Economic Co-operation and Development (OECD), and we have some of the highest growth rates in the world, exceeded in regional terms only by India and South-East Asia. Africa’s difficulty is the chronic lack of access to loans at rates equivalent or close to other regions. And this when liquidity is available. Which is not the case at present. This is the reason for the problems in Ghana and Zambia.
Before Covid-19, Ghana had one of the highest growth rates in the world. And now it can’t even roll over its debt, as countries with strong currencies do without difficulty, because they suck in savings from countries considered to be at risk in times of crisis. Africa has a stigma associated with this risk assessment because its economy is judged by its ability to meet external obligations, not internal imperatives. If African countries respond internally with social protection measures in the face of exogenous shocks, we must stop saying that this is bad management or a lack of prudence. Every country in the world has done the same in the face of the pandemic and the impact of the war in Ukraine. But Africans are the only ones being singled out as bad managers because they didn’t foresee this crisis? How cynical!
China, one of the main bilateral creditors of the African continent, refutes the “debt trap” theory. Its foreign minister, Qin Gang, spoke instead during his visit to the headquarters of the African Union (AU) in January of a “narrative trap” imposed on China and Africa. What do you think of this?
There is no Chinese trap, because they borrow more than others, at better rates and with no strings attached. Admittedly, the Chinese are not as transparent as we would like them to be, but it’s a bit of a stretch to turn them into the fall guys.
Isn’t the climate crisis increasing the level of national debt, given the lack of climate funding promised by the rich countries at the various COPs? How can they finance the climate emergency without increasing the debt burden?
Is increasing concessional financing a solution?
Concessional financing is not increasing, the statistics only show small fluctuations. Around 50 billion dollars. For the moment, with a total of more than 100 billion dollars, if we take into account military aid, it is Ukraine that is receiving facilities. Africans must learn the lesson of Covid-19. The much-vaunted solidarity has mainly served to divert aid from development programmes to vaccine manufacturers in the North. The lesson on climate financing is the same for now. Promises without a future.
The Paris Summit will be attended by several African leaders, including Gabon’s Ali Bongo Odimba, Mozambique’s Filipe Nyusi, Mauritania’s Mohamed Ould El-Ghazaouani and Comoros’ Azali Assoumani. By speaking with one voice, can African countries make themselves heard more effectively on the issues of debt and climate financing?
Without prior consultations, it is difficult to envisage common positions. Yet the African finance ministers, with the help of the ECA, have presented a list of 17 measures to reform the international financial architecture and deal with the urgent issues of countries’ public debt. I hope that African leaders are pursuing a consistent strategy.
Some African leaders are calling for debt cancellation. Is this a long-term solution?
I prefer to talk about debt restructuring.
What can we expect from the Summit for a “New Global Financial Deal”?
We need to establish a roadmap for navigating the complex process of reforming the international financial architecture.
Interview by Jean Marie Takouleu
