The 2024 OSAA Report challenges widely held assumptions about Africa’s debt, revealing that the continent does not suffer from a crippling debt overhang but instead faces a significant financing gap.
To achieve the Sustainable Development Goals (SDGs) and Agenda 2063 aspirations, Africa requires an additional $1.3 trillion to $1.6 trillion in financing. Thus, emphasizes the Report, borrowing remains a necessary tool to address the compounding crises of financial distress, climate change, food insecurity, and persistent conflict.
A re-examination of Africa’s historical use of debt instruments is crucial to addressing structural constraints and unlocking economic opportunities. By fostering economic growth and ensuring debt sustainability, debt can become a tool for progress rather than a hindrance.
Debt is an important mode of financing. While many countries are in debt distress, we must not treat Africa as a completely debt-distressed continent.Under-Secretary-General Cristina DuarteSpecial Adviser on Africa to the United Nations Secretary-General This shift requires aligning debt strategies with long-term development priorities.
“Debt is an important mode of financing. While many countries are in debt distress, we must not treat Africa as a completely debt-distressed continent,” Under-Secretary-General Cristina Duarte, Special Adviser on Africa to the United Nations Secretary-General, pointed out at the launch of the Report in New York. “Debt, when managed effectively, can help us invest in achieving development goals.”
The report highlights the urgent need to reform the global financing system to ensure predictable and affordable financing, prioritize development outcomes over private finance interests, and create fiscal space to fund SDG investments.
Cristina Duarte calls for the global financial community to “move beyond simplistic metrics and recognize the unique economic and structural realities of African nations.”
Existing frameworks, including debt restructuring arrangements like the Common Framework, the Report says, are insufficient to meet Africa’s development needs.
At the national level, African countries can deepen domestic debt markets to incentivize local investment and effectively engage with the private sector. Strengthening regional financing architecture can support transboundary infrastructure projects, complementing national efforts. Enhancing debt management and reform capacity across the continent will also play a critical role in addressing the development financing gap.
The report envisions debt as a means to support a more sustainable economic model. Moving beyond resource extraction for export, African economies can leverage debt to build value-added industries, fostering resilience and self-reliance.
The 2024 OSAA Report proposes actionable reforms and policy recommendations aimed at addressing Africa’s financing challenges.
Key recommendations
1. Increase access to affordable finance
Fulfill Official Development Assistance (ODA)pledges, allocating 10% to capacity building and digitization for domestic resource mobilization (DRM) systems. Reform Multilateral Development Banks (MDBs) to focus on long-term (30-50 years) concessional lending, increase capital, and lend in local currencies to reduce currency risks. Prioritize sustainable development by ensuring predictable, large-scale climate adaptation financing.
2. Reduce Borrowing Costs
Restructure high-interest, short-term debt into long-term, low-cost loans to ease fiscal pressure. Improve the G20 Common Framework with expanded eligibility, clearer processes, and debt service suspension during negotiations.
3. Enhance Debt Sustainability
Introduce debt service suspension linked to SDG progress. Establish a Sovereign Debt Authority to prioritize development in debt treatment.
4. Leverage Financing Innovations
Use state-contingent clauses to suspend debt payments during crises. Employ debt-for-development/nature/climate swaps to free resources for SDG investment.
5. Strengthen Regional Cooperation
Boost regional development banks and accelerate Pan-African institutions like the African Investment Bank and the African Monetary Fund. Facilitate cross-border financing for infrastructure and deepen regional financial markets.
