Africa, Development & Aid, Headlines, Inequality, Sustainable Development Goals

Opinion

Reforming Global Finance Is Africa’s Most Urgent Water Policy

Jun 9 2026 (IPS) - Somewhere in Africa today, a woman will spend more than 30 minutes collecting water that may make her and her children sick. At the same time, her government will face severe fiscal constraints that will limit its ability to provide clean water, among other basic services.

This injustice sits at the heart of Africa’s development challenge. And, with a strong “El Niño” climate cycle currently developing and threatening to disrupt fragile water supplies, the situation can only get worse.

Africa loses billions of dollars every year through unfair sovereign credit ratings, illicit financial flows, and mounting debt repayments – all symptoms of a global financial system that wasn’t designed with African development in mind. Reforming that system could unlock critical resources for investment in water, sanitation, and the foundations of economic transformation.

Some 418 million Africans still lack basic drinking water services, while 779 million lack basic sanitation. Sub-Saharan Africa remains the only region in the world where the number without access to basic drinking water continues to rise, even as climate change intensifies droughts, floods, and water stress.

No country can industrialize without reliable water systems. No health system can function without sanitation. Agricultural transformation cannot succeed amid worsening climate shocks. And the demographic dividend cannot be realized if women and girls continue to spend hours searching for water instead of pursuing education and economic opportunity.

Yet the financing required to build resilient water and sanitation systems continues to leave governments overburdened with debt repayments, excessive borrowing costs, and illicit financial flows.

Three Essential Challenges

African governments routinely pay borrowing costs that far exceed their actual risk profile. Despite evidence showing Africa’s infrastructure default rates are lower than those in other developing regions, perceptions of risk remain disproportionately high – and those skewed risk perceptions are embedded in sovereign credit ratings. The result is an “Africa premium” that shrinks the fiscal space available for public investment.

Estimates suggest African countries could save up to $74.5 billion if ratings were based on less subjective assessments. Simulations using the Universities of St Andrews and Leicester GRADE model show the human impact of these distortions. In Ghana alone, correcting for bias embedded in sovereign ratings could create enough fiscal space to extend basic water access to more than 417,000 people and sanitation facilities for 381,537 people.

Africa loses vast resources through illicit financial flows, which take three main forms: trade mis-invoicing (falsifying invoices to misrepresent price, quantity, or quality of goods to evade taxes and duties); profit shifting (multinationals exploiting tax loopholes to move reported profits from high-tax countries to low-tax havens); and opaque cross-border transactions (international financial movements hidden by complex customs requirements, poor data transparency, or illicit practices).

UNCTAD estimates that the continent loses $88.6 billion annually to illicit financial flows — resources that could transform access to water and sanitation. In Nigeria alone, curbing trade mis-invoicing could extend water access to 2.56 million people and sanitation services to more than 4 million.

Addressing this challenge requires action globally and domestically. Beneficial ownership transparency, automatic exchange of financial information, and fairer international tax rules must be matched by stronger domestic revenue systems and governance reforms across Africa.

The third challenge is debt.

In 2024, Africa’s external debt service reached $84.4 billion – nearly five times the level recorded in 2010. In several countries, debt servicing now consumes between 50 and 70 percent of government revenue, leaving little room for investment in critical sectors like water and sanitation.

Meanwhile, debt restructuring processes remain too slow and too heavily weighted against debtor countries. The developmental consequences of the current debt burden are already measurable: simulations show that under a scenario in which debt service is capped at just 5 percent of government revenue, Egypt could achieve near-universal access to clean water and sanitation. In Ghana, a more flexible Eurobond restructuring could have resulted in more than a million people gaining access to water and sanitation.

African governments recognize the urgent need for fiscal space to invest in long-term priorities, especially water and sanitation systems that are essential for public health, climate resilience, food security, and economic productivity, hence their adoption,  of the Common African Position (CAP) on Debt — a continental strategy for sovereign debt management and reform so that debt becomes a tool for structural transformation rather than placing economies in a chokehold.

So, when our governments advocate for more concessional financing or lower borrowing costs, they’re talking about the lives of real people, often the most vulnerable: women and children.

The international community must take three steps to accompany Africa on its journey to an economic transformation that truly benefits its people.

First, sovereign credit rating methodologies for African economies must be independently reviewed to correct structural distortions that continue to overprice African risk.

Second, the international community must curb illicit financial flows through stronger transparency standards, fairer global tax rules, and meaningful enforcement mechanisms.

Third, the international debt architecture must be redesigned to support development rather than undermine it.

Sixty-three years ago, African leaders gathered in Addis Ababa to declare that Africa would shape its own destiny.

The continent possesses the resources, institutions, and ambition to drive its transformation. What remains is the political will — globally and domestically — to build a financial system that enables, rather than constrains, Africa’s development.

Mavis Owusu-Gyamfi is President and CEO of the African Center for Economic Transformation (ACET). Francisca Tatchouop Belobe is the Commissioner for Economic Development, Trade, Tourism, Industry and Minerals (ETTIM) Department at the African Union Commission