(Ecofin Agency) - Seventeen motions have been submitted to be reviewed by African Ministers and multilateral partners to create a new global financial architecture. Documents seen and discussions with experts provide a glimpse into the shape of that architecture.
Addis Ababa means “New Flower,” according to tour guides we met in that famous Ethiopian capital. The city may once again confirm that meaning by being the starting point of a new global financial architecture. Indeed, today, March 20, African Ministers of Finance, Economy, and Planning are scheduled to hold a high-level meeting to review motions aimed at setting new mechanisms to facilitate access to global financial markets.
According to documents seen by Ecofin Agency and discussions with experts, seventeen proposals will be discussed. They range from unrestricted support for the appeal of UN Secretary-General Antoine Guterres to the establishment of an annual stimulus of $500 billion for the completion of the Sustainable Development Goals in low-resource countries. They also include a set of measures to reduce risk perception on the continent, coherent debt restructuring solutions, and proposals for more effective management of the Special Drawing Rights (SDRs) by the International Monetary Fund (IMF).
The meeting will be attended by ECA members and African government representatives as well as IMF and World Bank experts. It comes in a context where the developed countries cushioned the Covid-19 economic shocks with billions of dollars issued by their central banks while African countries were unable to do the same (at least to the same extent as developed countries).
The high-level meeting also comes after the failure of several initiatives that were supposed to support least-developed countries with assistance for debt restructuring and the issuance of new SDRs.
Even if the seventeen motions are adopted, their effective implementation will not be easy. For example, the UN Secretary-General wants reforms for a more equitable international tax system. African countries supported that stance with a motion suggesting the UN should be entrusted with discussions on the issue. But, there will be a need to convince the Organization for Economic Cooperation and Development (OECD) countries, whose companies and wealthy individuals have somehow accumulated more wealth according to consistent data. This issue of international taxation is not even the subject of one of the motions of the Addis Ababa conference.
On the other hand, to solve African countries’ debt issues, there will be a need to put figures into account. Sub-Saharan Africa is presented as being a region at risk of debt distress. The region is vulnerable to its debt due to the stress debt repayment imposes on public budgets, the rising costs of debts, and the depreciation of their currencies against the US dollar. But other figures provide a different perspective. According to data compiled by Statista, the average national debt of sub-Saharan African countries was estimated at only 55.3% of GDP in 2022 and is expected to continue to drop until 2025. In a paper shared with the media, the Institute of International Finance (IIF) noted that though it is declining, the average debt-to-GDP ratio in developed countries is 109%.
The decisions of the African Ministers of Finance, Economy, and Planning on these issues will be awaited by all observers. Some experts have pointed out how difficult it will be to push the reforms ahead because of the diverging interests. All in all, there are many challenges to overcome during this meeting, the 55th of its kind.