The African Forum and Network on Debt and Development (AFRODAD), a lobby for debt cancellation and addressing loan-related issues in Africa, has called for an overhaul of the global financial system to pave the way for a United Nations-led mechanism of assisting distressed countries.
If adopted, this would mean that the IMF’s long-held role as a mediator between creditors and lenders would end.
AFRODAD said IMF’s position as a creditor undermines its credibility to serve as a neutral player in debt distress resolution frameworks, especially in the present situation where resolution has been undermined by competing interests between commercial and multilateral creditors.
“With the failure of the existing debt relief and restructuring mechanisms, we are in the process of a new dispensation in a more democratic space under the auspices of the United Nations," AFRODAD Executive Director, Jason Braganza, said in Johannesburg.
"The fourth Financing for Development Conference in Spain later this year provides us with an opportunity to negotiate a call for a reformed global debt architecture that is intergovernmental in nature and establishes a United Nations Framework Convention on sovereign debt” he added.
AFRODAD has criticised the lengthy time taken to resolve debt distress cases, arguing that the current global financial system favours creditor interests.
The lobby is calling for a rethink of the G20-led common framework for debt resolution as well as the IMF and World Bank-led Global Sovereign Debt Roundtable which brings together debtor countries with their creditors.
Ghana, which on December 19, 2022, announced the suspension of debt service payments on Eurobonds, Commercial Term Loans, and most of the bilateral debt, failed to secure a Memorandum of Understanding with its creditors until January 29, 2025--some three years on.
Zambia, which defaulted in November 2020 having missed a $42.5 million (Sh5.4billion) coupon payment, also failed to ink a Memorandum of Understanding (MoU) with its creditors until October 13, 2023---three years later.
“In Africa as of today, more than half of the continent is facing a situation of being in debt distress or at high risk of being in debt distress. Indeed, four countries have already defaulted on their debt, these are Zambia, Chad, Ethiopia, and Ghana. Close to half the continent’s countries are paying more in debt service interest payments than on investments in public services such as education, health, water and sanitation”, Braganza says.
AFRODAD is stepping up the call for an overhaul of the global financial system as African countries return to the global market to refinance maturing debt at a relatively steep cost.
On February 25, 2025, Kenya returned to market with a fresh Eurobond issuance raising $1.5 billion in a 10-year note maturing in 2036 at a 9.5 percent coupon. In December 2024, Nigeria raised $2.2 billion through Eurobond issuances in a 6.5-year paper priced at 9.625 percent and a 10-year priced at 10.375 percent.
