Collective action can ‘move mountains’ for Africa – Morsy
Deputy Executive Secretary and Chief Economist of the Economic Commission for Africa (ECA), Hanan Morsy, has called for continued collective action in support of the Africa High-level Working Group on Global Financial Architecture (HLWG).
“Our key objective is to build African consensus on what needs to be done and amplify the continent’s voice on the global stage,” said Ms. Morsy, adding, “The work of this group (HLWG) shows that when we come together, we can move mountains.”
Ms. Morsy co-chairs the HLWG with African Union Commissioner Albert Muchanga and Ghana’s Minister of Finance, Ken Ofori-Atta.
In her remarks during a meeting with heads of regional and continental institutions, held on 25 May on the margins of the African Development Bank (AfDB) annual meetings in Sharm El Sheikh, Egypt, Ms. Morsy lamented the high cost of debt incurred by African governments.
“Debt service composes 22% of revenue” in Africa, limiting countries’ ability to make essential investments in health, education, and infrastructure to help operationalize the AfCFTA.”
Ms. Morsy underscored the urgent need to fix the global debt architecture so that countries in debt distress can obtain swift and effective debt restructuring.
The ECA Chief Economist highlighted some of the near-term reform proposals put forth by the HLWG, including the need to: suspend debt service for all countries entering the Common Framework restructurings to provide relief and incentivize speedy restructurings; expand eligibility to middle-income countries; establish Expanded Creditor Committees to incorporate private sector creditors, smooth coordination challenges, and accelerate restructurings; establish a ‘Comparability of Treatment’ formula to reduce technical disputes and accelerate restructurings further; and bolder use of IMF Lending into Arrears policies to reduce leverage of holdout creditors.
Credit enhancement tools and guarantee facilities would also help unlock more resources for investment, she noted. Such mechanisms can be combined with debt-for-climate investment swaps, which allow reducing countries’ debt servicing costs and create fiscal space.
Ms. Morsy urged stakeholders to rally behind a proposal by the AfDB and the Inter-American Development Bank for the rechanneling of Special Drawing Rights (SDRs) through Multilateral Development Banks.
“This will increase the leverage of SDR resources and provide much-needed liquidity,” Ms Morsy noted.
The meeting was chaired by AfDB President Akinwumi Ayodeji Adesina, who commended the work of the ECA and the HLWG, adding that “On the issue of debt resolution, I think AfDB and ECA will continue to work very hard” to ensure that Africa has a “common voice.”
The meeting was attended by over 18 heads of African regional and continental institutions.
The High-level Working Group is coordinated by the ECA. It comprises African Ministers of Finance, Planning and Economic Development, the African Union, the African Development Bank, Afreximbank, and the World Bank, and includes the participation of IMF staff and Executive Directors. The Group serves as a forum to develop reform proposals for the global financial architecture and strengthen the African voice on the global stage.