Africa addresses issue of rising global finance inequality at G20 talks

At the recent G20 finance ministers summit, the spotlight was on the need for fairer financial systems and improving Africa's access to debt.

- By Neesa Moodley

Former finance minister and chair of the Africa Expert Panel Trevor Manuel told journalists this week that three elements needed to be considered on the subject of debt, noting that Africa's interest rate burden had increased very rapidly.

His first point was also noted by African Development Bank vice-president and chief economist Kevin Urama, who said last month: “African countries pay about 500% more in loan interests when they borrow from the global capital markets compared to when they borrow from multilateral development banks such as the African Development Bank Group or the World Bank.

“Debt service costs in Africa could reach $89-billion in 2025, diverting resources away from investments in education, health and other productive sectors.”

Manuel added to this: “Debt squeezes out development; it impoverishes countries. There are elements of the cost of capital that need particular attention. Included in that is the credit ratings. When countries borrow and the interest rates are very high and they increase with time, there's a bigger problem going forward.”

The third aspect he noted was the importance of working with Africa to ensure the development of domestic capital markets.