The African Development Bank, AfDB, has launched a Debt Management Forum for Africa (DeMFA), a platform to manage Africa’s debt challenges against the backdrop of rising debt, increasing debt costs, and a decline in credit ratings across the continent.
While the launch event, held in Abuja, Nigeria, on December 16 and 17, 2024, the forum is more vital now considering global issues and the recent move by the United States’ President Donald Trump to cut US aid to Africa and other parts of the world, by winding down the operations of the US Agency for International Development (USAID).
The event, which included a policy dialogue with the theme “Making Debt Work for Africa: Policies, Practices and Options,” brought together representatives of African Ministries of Finance, Central Banks, debt management offices, academics, and other experts and stakeholders to exchange views on debt challenges and identify policy and strategic actions to make debt work for Africa.
In a statement by the AfDB, its Chief Economist and Vice President for Economic Governance and Knowledge Management, Kevin Urama, described the emergence of the forum as “another key milestone in the African Development Bank’s efforts to build Africa’s capacities and provide institutional frameworks and instruments for the Continent to address its persistent debt sustainability challenges… We must learn that development is a do-it-yourself business.”
“There is no alternative to getting our house in order; there is no alternative to sound public financial management in Africa. We need to make Africa’s capital work for Africa’s development,” Urama emphasised, just as other speakers stressed the importance of developing African solutions.
For instance, a Professor of Economics at Harvard University and former Chief Economist at the International Monetary Fund, Kenneth Rogoff, highlighted the advantages of borrowing in local currencies and under domestic jurisdictions, which can reduce borrowing costs and offers better alternatives for debt management.
According to the AfDB, Africa’s fiscal deficits in the last two decades have increased from $0.8 billion to almost $150 billion, with the debt-to-GDP ratio more than doubling from 33.6% in 2008 to 72.4% in 2021, before falling back to 64.8% in 2022. With global interest rates at their highest level in 40 years, debt service will cost Africa about $163 billion in 2024, up sharply from $61 billion in 2010.
“Against this backdrop, the Debt Management Forum for Africa is the latest in a series of concerted actions by the African Development Bank Group to support improved fiscal management by African countries. It follows the launch of the Strategy for Economic Governance in Africa (2021 – 2025), the Action Plan for the Management and Mitigation of Debt Distress Risks in Africa (2021 – 2023), the Macroeconomic Policy Management Academy for Africa, and the Public Finance Management Academy for Africa, among others.
“As a policy-level platform targeted at African Ministers of Finance and Central Bank Governors, it will serve as an implementation instrument for the existing strategy and Action Plan, while also complementing ongoing capacity-building efforts.” it stated.
Also speaking at the event, the Director of the African Development Institute at the AfDB, Eric Ogunleye, noted that DeMFA’s goals include strengthening African technical capacity for debt management, securing better credit rating for African countries, and the alleviation of debt distress in all African countries.
