The Executive Director for International Development Economics Associates (IDEAs), Mr. Charles Abugre has stated that, African current crop of creditors, especially the commercial ones are organized as cartels. “Shouldn’t African/developing ountries be similarly organized?”.
He made this statement when speaking at the International Conference on African Debt Crisis and the International Financial Architecture held in Accra.
The conference is the first major event being organized by IDEAs in Africa since the organization took a decision about 2 years ago to become more structured, building on 20 years of voluntary work by its founding members.
The International conference on the “African Debt Crisis and the International Financial Architecture, started from Wednesday, 27th and to end on Friday, 29th March, 2024 at the La Palm Royal Beach Hotel in Accra.
In his statement, Mr. Charles Abugre pointed out that, whilst Africa looks into the future, there is the immediate problem of addressing the current crisis. “The solutions are well known. Debt restructuring must lead to debt reduction. There are instruments to achieve this. In this conference, IDEAs will share our views of an alternative debt restructuring template. This is so it can be enriched”.
According to him, a template is no use if not adopted by governments adding that, there is the need to make an effort to disseminate it. “Above all, debt negotiations are about power relations”.
Mr. Abugre said, the African debt crisis of the 1980s and 1990s were essentially balance payments crisis – a decade rising petroleum prices side by side with declining agricultural commodity prices – leaving countries stuck for cash to keep the economies going.
“This current debt crisis also has external origins, this time not so much the decline in commodity prices but rising US interest rates exerting pressure on the yields of the commercial bonds that countries were lured by low interest rates and yield hungry investors to queue to issue Eurobonds. Yet the commodity dependence issue remains critical as it correlates with many factors. How we manage these commodities and how we reduce dependence on raw materials are part of the answers for debt sustainability. We must also ask the question whether at all as low income countries it is wise to issue foreign exchange denominated bonds? But if they do not borrow from capital markets what their options? These structural factors need to be properly understood because of their binding nature on the options that countries have for raising resources for development sustainably”.
African governments he averred, may do their part but would not be sufficient for as long as the international architecture in which they operate is not fit for purpose or is stuck against developing countries.
He emphasized that, a system that woks for the global economy should enable poorer countries access resources for development affordably. “This is what the development banks were set up for. When they are in temporary balance or liquidity problems, they should have adequate resources to back their efforts to undertake adjustment without prolonged or deep austerity. That’s what the IMF and the SDRs were meant for. These institutions appear to be playing roles other than what they were meant to be doing thereby making temporary difficulties of poorer countries worse. We hope this conference will call them out”.
