‘Common humanity’: Africa seeks help to fight vicious funding squeeze

With nearly 1.4bn people, about one-sixth of the world’s population, Africa’s importance in the global economy is growing. But, since the turn of the century, the continent has been faced with several shocks that have arisen largely beyond its borders.
The average debt ratio in sub-Saharan Africa has almost doubled in just a decade; from 30% of GDP at the end of 2013 to almost 60% of GDP by end-2022, according to the International Monetary Fund.
Repaying this debt has also become much costlier.
African nations have been pummelled by debt, poverty and natural disasters for quite long. The myriad troubles facing the continent were in focus at the week-long IMF-World Bank talks in Marrakesh, Morocco, which ended last Sunday.
Egypt, North Africa’s largest economy, needs to repay some $100bn of hard-currency debt over the next five years. Cairo currently spends over 40% of revenues on interest payments; financing needs for fiscal 2023-04 stand at $24bn.
Kenya’s public debt stood at 67.4% of GDP at the end of 2022, according to the World Bank, putting it at high risk of debt distress.
Surging food prices in the aftermath Russia’s invasion of Ukraine have caused a cost of living crisis across Africa, while heavy borrowing costs are raising the risk of default.
The IMF estimates that more than half of Africa’s low-income countries either face a high risk of debt distress or are already experiencing it.
In some countries, more than 40% of the state budget goes to servicing the debt: An unsustainable level in countries that need to maintain basic public services such as water and electricity.
But negotiations to restructure debts have become more complicated over the years as new creditors such as China, Saudi Arabia and Brazil have emerged, in addition to private lenders.
Now countries must negotiate terms with China and the Paris Club of creditors, which mostly comprises Western nations with very different policies as Beijing.
For some African officials, a good start would be erasing the mountain of debt that is forcing many countries to spend much of their revenue on paying back interest.
The World Bank said earlier this month that growth in sub-Saharan Africa has stalled since 2015 in per capita terms.
The region is projected to contract in per capita terms over the 2021-2025 period, it said, “thus potentially marking a lost decade of growth.”
While they wait for debt relief, African countries complain that the West has been quick to provide huge financial assistance to Ukraine following Russia’s invasion.
The World Bank has provided nearly $20bn to Kyiv since the start of the war in late February 2022.
The IMF has signed a $15.6bn aid programme with the Ukrainian government in March as part of a broader, $115bn deal that includes the G7 and the European Union.
“Everybody agrees that it is important to help Ukraine financially,” an African official told AFP in Marrakesh. “But in some countries there is a feeling that the urgency is just as important in their countries.”
The IMF announced on Saturday member nations agreed to increase their contributions to the global lender and give sub-Saharan Africa a third seat on its executive board at its first meetings on the continent since 1973.
African finance ministers appealed for help and “common humanity” in their fight against a vicious funding squeeze caused by mistakes its politicians blame on wealthy countries, which the Israel-Hamas conflict may now makes worse.
Higher interest rates and surging inflation after the US and Europe spent trillions of dollars during the pandemic hit poor nations from both sides, said Egyptian Finance Minister Mohamed Maait.