Africa calls for reform of global financial architecture

African countries have resolved to speak with one voice to secure a fairer global financial system. Leaders and experts from various African countries have also castigated the existing global financial architecture and pointed out that the existing credit rating systems do not appreciate Africa's realities and potential.

While speaking following the inaugural two-day African Union Debt Conference, which concluded in Togo on Wednesday, experts admitted that traditional financial lifelines like the Official Development Assistance, which is funding provided by Western governments and USAID, are either being cancelled or fading away. The continent, therefore, needs to chart a bold and principled new path to avoid long-term financing options which often leave nations with unsustainable debt burdens.

John Dramani Mahama, Ghana's president, called for the formulation of a new public debt management strategy to free African countries from the grip of what has become a debt crisis on the continent. Mahama said that though necessary, debt should not leave African countries in crisis but should serve as a worthy fuel to accelerate development.

"Africa must speak with one voice to push for fairer global financial rules. Credit rating agencies must adopt methodologies that reflect the structural reforms and the growth potentials of African economies, not just penalizing us for volatilities we did not create," Mahama said.

Claver Gatete, executive secretary of the United Nations Economic Commission for Africa, said that Africa is not merely confronting a debt crisis but it is facing a development crisis. This is because most African countries are faced with a situation where debt servicing competes directly with health, education, infrastructure and the fundamental right to development.

While pointing out that Africa is being measured by outdated methods and narrow perceptions that fail to account for Africa's potential, Gatete said that African countries must urgently and collectively call for the reform of the global financial architecture.

"The current system, regrettably, is no longer fit for purpose. We must accelerate the establishment of the African Credit Rating Agency, an institution that understands Africa's realities, reflects its potential and restores fairness to the global perception of African risk," Gatete said.

Jackson Otieno, a policy analyst at the Kenyan-based African Institute for Development Policy, said that there is a need for a global multilateral bridge between African countries, global credit rating agencies, and market participants in order to address historical biases, information asymmetries, and lack of trust in African economies. In addition to unfavorable debt terms, Otieno said that Africa faces multiple challenges such as climate change, shrinking external aid, growing debt burdens, and global economic uncertainty.

"The era of aid is fading. We must look at innovative financing mechanisms and quantify the potential gains from addressing inefficiencies such as corruption. It is time for African countries to think about transitioning from donor dependency to domestic resource mobilization," Otieno said.