Local Debt Solutions at the Forefront as AfDB Launches Pan-African Debt Management Forum
The African Development Bank 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.
The launch event, held in Abuja, Nigeria, on December 16 and 17, 2024 included a policy dialogue with the theme “Making Debt Work for Africa: Policies, Practices and Options.” The dialogue 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.
Opening the Forum, Nigeria’s Minister of Finance, Wale Edun, represented by Patience Oniha, Director General of the Debt Management Office, said, “The introduction of DeMFA, whose launch and inaugural meeting we are gathered for today, is very significant in that it is focused on public debt. I would like to commend the African Development Bank for the very laudable initiative of instituting a Debt Management Forum for Africa… it certainly is a welcome development to have a Debt Forum specifically dedicated to Africa.”
Kevin Urama, African Development Bank Group Chief Economist and Vice President for Economic Governance and Knowledge Management, 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.”
Eric Ogunleye, Director of the African Development Institute at the African Development Bank Group, presented an overview of the new Forum, highlighting three key roles it will serve: knowledge platform, coordinating platform for stakeholders, and hub for peer learning. Among DeMFA’s goals, he added, are strengthening African technical capacity for debt management, securing better credit rating for African countries, and the alleviation of debt distress in all African countries.
The presentations and panel sessions explored debt vulnerabilities, restructuring the global debt architecture, debt transparency and disclosures, loan negotiations, credit ratings, productive uses of debt, and the importance of collaborations and partnerships. Participants from several countries shared their experiences in bolstering national debt management, including lessons about supporting reforms with legislative frameworks, and the importance of adopting a comprehensive approach to communications and stakeholder engagement.
Seth Terkper, a former Ghana Minister of Finance, moderated the opening panel. He called for governments to adopt more holistic accounting practices that prioritise the proper management of debt arrears. Accounting reforms should include a shift from a “primary balance” framework to a more realistic “fiscal balance” approach, he said.
Kenneth Rogoff, Professor of Economics at Harvard University and former Chief Economist at the International Monetary Fund, spoke on the advantages of borrowing in local currencies and under domestic jurisdictions, which can reduce borrowing costs and offers better alternatives for debt management.
Speakers reiterated the importance of developing African solutions. “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,” stressed Bank Group Vice President Urama.
In the last two decades, Africa’s fiscal deficits 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.
