Countries in the West often plead with us to invest in the kind of ambitious resilience projects we need to survive in a warming world. But in Africa, we can’t fix the climate issue unless we fix the debt issue. Of the 52 low- and middle-income countries that have defaulted on their debts or have come close to it in the last three years, 23 are in Africa. The continent’s debt burden is skyrocketing as a result of factors beyond its control: the aftershocks of the pandemic, rising fuel and food prices, higher interest rates and climate catastrophes that weaken our economies and sap our ability to repay creditors.
During the pandemic, rich countries pumped trillions of dollars into their economies to support families and businesses. African governments had no such option. Instead, their leaders kept their nations afloat by taking on more debt, which turned out to be a very expensive life raft. As a result of rising interest rates, Africa’s debt repayments will surge to $62 billion this year, up 35 percent from 2022.
To put this figure into context, Africa is now paying more in debt service than the estimated $50 billion a year the Global Center on Adaptation says it needs to invest in climate resilience. These investments are not nice-to-haves — they are vital for building roads, bridges and dams that can withstand torrential rains and floods. Failure to do so is to invite catastrophe, as the recent floods in Libya so tragically attest.
But instead of receiving funds to address the climate crisis, Africa is borrowing at a cost up to eight times higher than the rich world to rebuild after climate catastrophes. This is why Africa urgently needs a pause in debt repayments so that it can prepare for a world of ever greater climate extremes. The Annual Meetings of the International Monetary Fund and the World Bank in Marrakesh, Morocco, that begin Monday are a good place to start.
The global financial system was built to be a safety net for the world’s poorest countries, a fail-safe to prevent financial instability. But the world looks very different than it did nearly 80 years ago, when the architects of the system gathered at Bretton Woods to craft a new world order. The framework they installed is now outdated, dysfunctional and unjust. Outdated because the international financial institutions they created are too small and limited to fulfill their mandate. Dysfunctional because the system as a whole is too slow to respond to new challenges, such as climate change. And unjust because it discriminates against poor countries. In fairness, the World Bank and the I.M.F. now recognize that climate change is a threat to economic and financial stability, and they are changing their lending policies in response. But much more needs to be done — and we are running out of time to do so.We are not the only ones who think the system needs fixing. António Guterres, the U.N. secretary-general, has called on the I.M.F. to rechannel $100 billion a year in special drawing rights, an international reserve asset, to pay for investments in sustainable development and climate action. The Bridgetown Initiative, co-started by Mia Mottley, the prime minister of Barbados, also puts forward measures to channel more credit and investment into climate resilience, and to lay down rules for providing debt relief for climate-vulnerable nations. This week’s meetings in Marrakesh are an opportunity to start transforming proposals into actions.Africa called for a 10-year moratorium on interest payments on foreign debt to give the world’s most vulnerable countries the space to invest in climate resilience and other pressing needs, such as health and education. And we need a more imaginative use for debt relief — for example, debt-for-nature swaps — where a portion of a nation’s foreign debt is forgiven in exchange for local investments in environmental conservation measures. This is what has allowed the Seychelles to invest in marine conservation to protect its oceans and strengthen its defenses against rising sea levels. We also need more flexibility built into the system. Debt repayments, for example, should be suspended automatically when climate disasters strike.
It has taken Zambia three years to reach a restructuring agreement with creditors, just one example of how debt renegotiations get drawn out far too long. We need a speedier process that will quickly provide effective relief for the 52 countries that have defaulted or are at risk of it.
We are not pretending this will be easy — creditors must all agree, and there are thousands of them. The problem is not so much the scale of the $1.8 trillion owed by African governments. Germany’s total debt stands at $2.6 trillion. Rather, it is the complicated structure: The private sector, including bondholders, holds 40 percent of the continent’s public external debt; multilateral banks such as the World Bank and other international finance institutions hold another 38 percent; and creditor nations, such as China, hold 21.5 percent.
Right now, China is not a member of the Paris Club, an informal group of creditor nations, but as Africa’s largest bilateral lender, it needs to be part of the conversation. By joining in the recent renegotiation to restructure $6.3 billion of Zambia’s foreign debt, over 20 years with a three-year grace period, China showed it could be part of the solution.
Africa is doing all it can to adapt to the consequences of climate change that are not of its making. But it cannot adapt alone. The financing gap is enormous and so are the continent’s needs.
Africa wants to work with the rest of the world to achieve solutions. With its young population, vast renewable energy and mineral resources and large tracts of uncultivated arable land, the continent is more important to future global prosperity than ever before. Making global finance responsive to Africa’s climate needs is one of the ways to ensure that Africa succeeds, bringing benefits to the whole world.
