The African Development Bank (AfDB) President, Dr. Akinwumi Adesina, has called for a quick and comprehensive plan for debt restructuring in Africa.
Speaking at the launch of the African Development Bank’s 2021 edition of its annual African Economic Outlook recently, Adesina urged African governments to consider collectively establishing an African financial stabilisation mechanism, which would give Africa the fiscal space it needs to deal with debt. Africa’s collective debt now stands at 70 per cent of the continent’s gross domestic product (GDP).
“It is high time that we set up a homegrown financial stability mechanism where we work together to mutualise our funds and ensure we avoid the spillover effects that come from global pandemics or any external shocks,” the head of Africa’s premier financial institution said.
“We must start by making sure that we carry out the macroeconomic policy reforms and the fiscal policy reforms that we need to get done,” he said, adding that Africa “is not looking for a free pass. We are just looking for an equitable way in which Africa’s fiscal space gets dealt with.”
The idea was backed by Joseph Stiglitz, who proposed an international debt framework.
“That’s a question I’ve been very concerned with for a long time,” Stiglitz said.
“You need debt restructuring, and that needs to be really high on the international agenda. Every country has bankruptcy laws but there’s no bankruptcy law for international debt. When there’s too much debt, it’s as much the creditor’s problem as the debtor’s problem.”
Stiglitz added: “What needs to be done with debt is comprehensive and quick restructuring. We don’t want to fall into the trap of doing too little, too late.” Stiglitz’s proposal calls for an international debt framework that includes the private sector, given its growing role as a source of government debt.