By Duncan Miriri
CAPE TOWN (Reuters) – Growing external debt burdens are crippling the world’s poorest countries, a group of former African leaders warned on Thursday as they pushed for a new programme of collective relief from private, bilateral and multilateral creditors.
South African President Cyril Ramaphosa is hoping to use his country’s current presidency of the Group of 20 nations to champion the cause of the developing world, including action on debt relief and a more equitable global finance architecture.
But the effort faces formidable challenges given the “America First” agenda of U.S. President Donald Trump’s administration, which is carrying out massive cuts in foreign aid contracts and overall U.S. assistance around the world.
Speaking at a news conference on the margins of a G20 finance ministers meeting in Cape Town, ex-Nigerian president Olusegun Obasanjo, who is chairing the African Leaders Debt Relief Initiative, said debt was strangling development.
“The money that should have gone into essential areas of human welfare and human development, education, health, nutrition, is given to pay debt that seems to be interminable,” he said.
The initiative, backed by seven former African heads of state, is calling for a plan modelled after the Highly Indebted Poor Countries (HIPC) programme of the 1990s, to allow debtors to deal with their creditors collectively.
RESTRUCTURING DEBT
The plan would include restructuring private debt and bonds as well as loans from official creditors, they said, and cover heavily indebted nations in Africa, Asia, the Caribbean and Latin America.
It would also seek to lower borrowing costs for developing countries.
The United Nations Development Programme called on Tuesday for a similar deal, warning that a worsening debt crisis among developing nations was draining their economies of much-needed liquidity.
The UNDP calculated that a HIPC-style plan that reduced debt stock by 60% could save the world’s 31 poorest countries nearly $80 billion.
A previous G20 debt relief initiative – known as the Common Framework – that aimed to enable debt restructuring on a case-by-case basis has not worked well, the African leaders said. Only a handful of countries have utilised that initiative.
“What the leaders are calling for is a framework where all countries can be brought in at the same time,” said Patrick Njoroge, an adviser to the initiative. “The case-by-case issue is problematic. It’s also taking a long time.”
Global multilateralism is facing growing headwinds.
The G20 finance ministers meeting has been undermined by high-level absences and concerns over the impact of aid cuts by major economies including the United States and Britain.
“That is the more reason why this initiative should move aggressively,” said Joyce Banda, a former president of Malawi.
“We have to turn around our economies ourselves and for that to happen, we must start from a clean slate. These debts have to be forgiven.”
(Reporting by Duncan Miriri; editing by Joe Bavier and Mark Heinrich)
Comments