#AfDBAM2024: A Catalyst to Reforming Global Financial Architecture to Prioritize Africa’s Needs

By Victor MUJIDU

President William Ruto, among other heads of state, has called for a radical change in the global financial architecture to amplify African needs and subsequently meet the Sustainable Development Goals (SDGs) to fulfill the climate action commitments as agreed in the Paris Conference.

In the opening ceremony of the African Development Bank annual meeting 2024 at KICC, Nairobi, President William Ruto pushed the agenda of additional finance for low-income countries and those that are vulnerable, fragile, or conflict-affected countries, which are mostly African countries.

“We need a financial architecture that has the following characteristics: one, long-term financing with a 40-year grace period, 10 years, or something in that order; two, low interest rates; concessional financing, including, where possible, grants; third, we also need financing at scale; and fourth, we also need financing that is flexible, especially that response that is climate sensitive. So, if there are shocks, that financial architecture must be responsive because climate change is the new normal,” said President Ruto.

According to Ruto, the conversation pertaining to global reform is no longer a concern for the global leaders but rather a concern for the Africa region in particular.

“The conversation in the world is no longer whether we have a fit-for-purpose international financial architecture; everybody admits that there is something fundamentally wrong with it, and the issue in conversation now is where and how do we reform it?” he added.

His statement was backed by Akinwumi Adesina, the AfDB President, who highlighted the need for comprehensive debt resolution for African countries, citing the 1990s debt relief initiative as a lesson learned.

Also, he called for modifications to global taxation rules to ensure they serve developing countries, particularly in light of illicit capital flows and profit tax avoidance.

“Unfortunately, we shouldn’t forget that Africa went through stuff like that in the 90s with the multilateral debt relief initiative and also the highly indebted poor countries initiative by just dragging and dragging, and unfortunately, we lost in decades, so there is a need for more timely, comprehensive debt treatment, definitely structuring, and debt resolution for African countries,” said the AfDB President.

“The rules of global taxation need to be modified to ensure that they are serving developing countries; cooperation across the additional tax rules is needed to avoid Africa losing taxes to the multilateral, complex multinational corporations that illicit capital flows,” he added.

Africa has been an exorbitant borrower, relying on international financial institutions such as the World Bank and the IMF. On the same note, inadequate financing toward climate change liberation would also lead to uncongenial meeting of the SDGs.

“The global financial system is not enabling financing at the scale needed for accelerated development to be the SDGs, and in other nations, Secretary General Antonio Guterres noted that the financing debt now has moved from Ksh328.8 trillion ($2.5 trillion) to Ksh526 trillion ($4 trillion) annually, and Africa alone will need Ksh171 trillion ($1.3 trillion), and due to this lack of adequate financing, Africa will not be able to meet the SDGs by 2030 on our current trajectory, noted President Akinwumi Adesina.

The AfDB annual meeting, however, is unconventional in ensuring the existence of global financing mechanisms that give Africa and other developing countries access to adequate and equitable concessional financing and to affordable market-based resources to accelerate sustainable development.