Heavily indebted African countries are getting a raw deal from the international financial system which charges them “extortionate” interest rates, the UN Secretary-General Antonio Guterres said on Saturday.
The United Nations chief wants far-reaching reforms to the structure of international finance to serve the needs of developing countries more efficiently, he told the opening ceremony of the annual African Union summit in Ethiopia.
“We need a new debt architecture that provides debt relief and restructuring to vulnerable countries,” he said.
“The global financial system routinely denies (developing countries) debt relief and concessional financing while charging extortionate interest rates.”
The coronavirus pandemic pushed many poor countries into debt distress as they were expected to continue servicing their obligations in spite of the massive shock to their finances.
Public debt ratios in sub-Saharan Africa are at their highest in more than two decades, the International Monetary Fund said last year.
Governments on the continent, including Ethiopia, sought debt restructuring deals under an IMF programme to help them navigate the crisis, but conclusion of the process has been delayed.
Others, which have not sought to restructure their debt, like Kenya, have seen their debt sustainability indicators worsen after the pandemic hit their finances.
All these factors have hindered their ability to invest in critical areas like health and education, Guterres said.
“African countries cannot… climb the development ladder with one hand tied behind their backs,” he said.
Ethiopia’s Prime Minister Abiy Ahmed echoed the call.
“Nearly all of us want to put our economies back on a growth trajectory but this will not happen without sufficient restructuring to make our external debt sustainable,” he said.
The summit, which brings together leaders from the 55 African nations, is also focusing on deepening food and security crises on the continent.
Armed conflict from the Sahel to the Horn of Africa and the impacts of droughts and floods have driven ever more Africans from their homes.
Hunger, driven by the impact of the armed conflicts and also extreme weather that scientists have linked to climate change, has also worsened in several nations.
Somalia is on the verge of famine after five failed rainy seasons, with hundreds of thousands of people suffering catastrophic food shortages.
“We need to critically assess why one third of the hungry people in the world are in our continent,” Abiy said.