UN Secretary-General António Guterres addresses the media at the G20 Summit in South Africa. Credit: UN Photo/Ropafadzo Chiradza

By Danny Bradlow
PRETORIA, South Africa, Nov 26 2025 (IPS)

US president Donald Trump’s efforts to derail a successful wrap-up of the G20 summit in Johannesburg failed. Trump boycotted the meeting and the US told other countries through diplomatic channels not to sign a communiqué. Nevertheless, the 19 remaining countries and regional organisations signed a 30-page declaration.

This called for, among other things, increased funding for renewable energy projects, more equitable critical mineral supply chains and debt relief for poorer countries. Senior research fellow Danny Bradlow explains what was, and wasn’t, achieved.

In what ways was South Africa’s G20 presidency a success?

The G20 has been a great diplomatic success for South Africa in at least three ways.

First, it succeeded in leading all the other G20 countries and organisations to adopt by consensus a leaders’ declaration despite a boycott and bullying tactics by Washington.

The 120 paragraph Leaders’ Declaration covered all the issues embodied in the “Solidarity, Equality and Sustainability” theme that South Africa chose for the G20. They included:

• • debt and access to affordable, sustainable finance

• • financing for a just energy transition

• • critical minerals

• • inequality

• • a second phase for the

Compact with Africa

• The first phase was launched in

2017 during Germany’s G20 presidency

• and provided a framework for Africa’s engagement with its development partners.

• • illicit financial flows

• inclusive growth.

Second, South Africa succeeded in launching a number of initiatives over the course of the year.

Firstly, the G20 acknowledged South Africa’s five years of support for the establishment of an African Engagement Framework within the G20’s finance track. It is intended to support enhanced cooperation between Africa and the G20.

Secondly, leaders expressed support, in various ways, for the G20 working group initiatives on illicit financial flows, infrastructure, air quality, artificial intelligence, sustainable development and public health. The ministerial declaration on debt was also supported. This includes reforms around initiatives supporting low and middle income countries facing debt challenges.

Thirdly, the Ubuntu Legacy Initiative was launched. This is designed to fund cross-border infrastructure in Africa. It was also agreed that an Ubuntu Commission will be set up to encourage research and dialogue on dealing cooperatively with global challenges. Ubuntu can be explained with reference to the isiZulu saying ‘umuntu ngumuntu ngabantu’ which means ‘a person is a person through other people.’ It entails an ethics of care, compassion and cooperation.

Lastly, South Africa succeeded in delivering an effective, efficient and constructive G20 year. This is no small feat. It required the country to organise more than 130 meetings of G20 working groups, task forces and ministerial meetings, in addition to the leaders’ summit.

Is this only a good news story?

It is inevitable that any complex, multifaceted and voluntary process involving participants with strong and contrasting views will not be an unqualified success.

This, without doubt, is the case with South Africa’s G20 year. The environment was complicated by a number of factors:

• • the wars in Gaza, Ukraine and Sudan

• • the actions of the US and some of its allies to undermine the international community’s efforts to address the intertwined challenges of climate, biodiversity, energy, poverty, inequality, food insecurity, debt, technology and development, and

• trade wars initiated by Trump imposing tariffs on trading partners.

These factors meant that getting the diverse membership of the G20 to reach agreement on a broad range of complex issues would be extremely difficult. In fact, it would only be possible to do so at a high level of abstraction.

Unfortunately, this proved to be the case. The result is that the G20 Leaders’ Declaration largely boils down to a set of general statements that are almost totally devoid of commitments for which states can be held accountable. Such general statements are not uncommon in the diplomatic statements issued at the end of high-level multilateral meetings. However, this is an extreme example.

The leaders expressed their support for a number of voluntary principles on issues such as disaster relief, artificial intelligence, critical minerals and debt. They also expressed support for the work of organisations like the multilateral development banks and the International Monetary Fund, and for some specific South African led initiatives like the review of the G20 itself.

However, there are no time frames or deliverables attached to these expressions of support.

What needs to be done to make the declaration effective?

The G20 is a voluntary association with no binding authority. The declaration’s efficacy therefore ultimately depends on all the G20’s stakeholders both taking – and advocating – for action on the issues raised in it.

These stakeholders include states and non-state actors like international organisations, businesses and civil society organisations.

The value of the declaration is how both the state and non-state actors use it to advocate for action. That can be in future G20 meetings as well as other regional and international forums.

How can the declaration be used to lead to action?

One of the biggest challenges facing African countries is debt. Over 20 are either in debt distress or at high risk of debt distress. Many African countries are being forced to choose between servicing their debts and investing in the development and climate resilience of their own populations.

The challenge that this creates for African states is exacerbated by their limited access to affordable, predictable and sustainable sources of development finance.

This means that African countries are unlikely to gain a sustainable path to reaching their development and climate goals without substantial action on debt and development finance. The Leaders’ Declaration, in paragraphs 14-22, clearly recognises the challenge. Key elements include:

• • the endorsement of

the statement

• their finance minister and central bank governors made on debt sustainability

• • a reiteration of the support for the

Common Framework

• for dealing with low-income countries in debt distress. The framework establishes a process for dealing with the official and commercial debt. But the process has proven to be too slow and cumbersome.

• • a commitment to working with the

Global Sovereign Debt Roundtable

to explore better ways to meet the needs of debtor countries in distress and their creditors. This roundtable establishes an informal mechanism that brings together creditors and debtors and other stakeholders in sovereign debt to discuss ways to improve restructuring processes.

But these will be just empty words unless the endorsements are turned into action.

There are three actions that stakeholders can take.

First, African leaders can form a regional borrowers’ forum to discuss the debt issue and share information on their experiences dealing with creditors and on developing common African positions on development finance and debt. This would build on the work done by:

• • the African Expert Panel appointed by South African president Cyril Ramaphosa, and

• the African finance ministers under the auspices of the African Union and the UN Economic Commission on Africa.

They can also use this forum to engage in open discussions with African non-state actors.

Second, African non-state actors can develop strategies for holding the leaders accountable if they fail to follow up on the declaration. And they can hold creditors accountable for their actions in their negotiations with African debtors in distress.

Third, African non-state actors should initiate a review of how the IMF needs to reform its operational policies and practices. Africa has eloquently advocated for greater African voice and vote in IMF governance. The next step should be to explore how the substantial changes that have taken place in the scope of IMF operations can be translated into operational practices. These include the macroeconomic impacts of climate, gender and inequality.

Daniel D. Bradlow is Professor/Senior Research Fellow, Centre for the Advancement of Scholarship, University of Pretoria

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Rising debt, geopolitical instability and declining aid flows are intensifying external pressure on African economies. In a briefing to the Africa Group of ambassadors at the United Nations headquarters last July, Claver Gatete, Executive Secretary of the Economic Commission for Africa (ECA), highlighted the economic pressures facing African countries and outlined ECA’s response, from budget stabilization and strengthened data systems to advancing regional priorities. Held at the Permanent Mission of the African Union to the UN, the session came amid growing uncertainty for African economies, with many facing debt distress, inflation and trade disruptions driven by global policy shifts.

By Danny Bradlow
PRETORIA, Nov 20 2025 (IPS)

The end of South Africa’s G20 presidency does not mean the end of its ability or responsibility to promote the issues it prioritised during 2025. It can still advocate for action on some of these issues through its further participation in the G20 and in other international and regional forums.

In this article, I argue that going forward South Africa should prioritise the financial challenges confronting Africa that it championed in 2025.

South Africa established four overarching priorities for its G20 presidency. Two of them dealt with finance. One sought to “ensure debt sustainability for low-income countries”. The other was to mobilise finance for a just energy transition.

The importance of debt, development finance and climate to Africa’s future is clear. Over half of African countries are either in debt distress or at risk of being in distress. More than half of Africa’s population live in countries that are spending more on servicing their debt than on health and/or education.

In addition, 17 African countries experienced net debt outflows in 2023. This means that they were using more foreign exchange to pay their external creditors than they received in new debts that could be used to finance their development. The continent is also experiencing extreme weather events that are adversely affecting food security and human wellbeing.

In short, African countries are caught in a vicious cycle. The impacts of climate and their struggle to meet their debt obligations are interacting in ways that undermine their ability to meet their sustainable development goals.

South Africa’s priorities

South Africa’s priorities for its G20 presidency were ambitious. Success required meaningful action at three levels:

Awareness. South Africa would need to bring the international community to a better understanding of the nature of the debt and development finance challenges confronting African countries and of the consequences of failing to address them.

Process. South Africa would need to convince the G20 to correct the shortcomings in the Common Framework it had devised to deal with low-income countries seeking debt relief.

The examples of Zambia and Ghana showed that the Common Framework was cumbersome, slow and unduly favourable to creditors. For example, the framework requires the debtor to engage separately with each group of its creditors in a sequential process. This means that it should not negotiate with its commercial creditors until it has successfully negotiated with its official creditors.

Commercial creditors can’t give debt relief until the official creditors are satisfied with their deal and are confident that the commercial creditors will not receive more favourable treatment from the debtor than they have received.

Another complication is the IMF’s multiple roles in debt restructurings as an advisor to and a creditor of the debtor countries. In addition, it does the debt sustainability analysis that determines the amount of debt relief that all other creditors are expected to provide to the debtor country in order for it to regain debt sustainability.

The more optimistic its assessment, the smaller the contributions the various creditors, including the IMF, are expected to provide. These contributions can either be in the form of new funding or new debt terms.

Substance. The current debt restructuring process treats debt as a technical financial and legal problem rather than as the complex multifaceted problem that is experienced by debtor countries. The former perspective limits the scope of debtor-creditor negotiations to the terms of the financial contracts.

The negotiations focus on the adjustments that must be made to these terms because the debtor cannot comply with its originally accepted obligations. They treat as largely outside the scope of the discussions the adverse impact the debt situation has on the sovereign debtor’s other legal obligations and on the social, political, environmental and cultural situation in the debtor country.

This approach in effect leaves the debtor to deal with these other issues on its own. This artificial distinction between the debtors’ other legal obligations and those it owes to its creditors makes it very difficult for the debtor to escape the vicious debt, development and climate cycle in which it is trapped. It forces it to choose between its commitments to its creditors and its development obligations.

Over the course of 2025, South Africa has been very effective in raising awareness of the African debt crisis and its dire impact on African countries. South Africa persuaded the G20 finance ministers and central bank governors to issue a declaration on debt sustainability at the end of their October meeting.

The declaration is the G20’s eloquent acknowledgement of the problem and of the need for more discussion of how these debt issues are managed by both debtors and creditors. Unfortunately, it does not contain any firm G20 commitments on what it will do to remedy the situation.

There has not been substantial progress at the process and substance levels. This is unlikely to change in the remaining weeks of South Africa’s G20 presidency.

But there are three actions that South Africa can take beyond the end of its term to ensure that the African debt crisis continues receiving attention.

Three actions

First, it should ask a group like the African Expert Panel that it established to advise the president to prepare a technical report that identifies and analyses all the barriers to Africa accessing affordable, sustainable and predictable flows of external development finance.

This report should be submitted to the South African president in the first half of 2026. Next year, South Africa will still be a member of the G20 Troika, which consists of the current, immediate past and the incoming G20 presidents.

Consequently, next year, it will still be able to table the report at the G20. South Africa can also use the report to promote action in other appropriate regional and global forums.

Second, South Africa and the African Union should create an African Borrower’s Club that is independent of the G20. This club should be a forum in which African sovereign debtors can share information and lessons learned about negotiating sovereign debt transactions and about responsible debt management. When appropriate, the club can work with regional African financial institutions.

The club, working with regional organisations like the African Legal Support Facility, can also sponsor workshops in which interested African sovereign debtors can share information and more critically assess their financing options. They can also work to improve their bargaining capacity in sovereign debt transactions.

The African Borrower’s Club should also be mandated to establish an African Sovereign Debt Roundtable that is modelled on the Global Sovereign Debt Roundtable. This entity should be an informal forum, based on the Chatham House Rule in which the various categories of stakeholders in African debt can meet to discuss the design of a sovereign debt restructuring process that is effective, efficient and fair and that adopts an holistic approach to a sovereign debt crisis.

Third, South Africa should capitalise on the fact that the impacts of climate, inequality, unemployment and poverty on Africa’s development prospects are now acknowledged to be macro-critical, and so within the IMF’s macro-economic and financial mandate. South Africa should call for a review of the IMF’s operating principles and practices and its governance arrangements.

This call should note that the multilateral development banks have been the object of G20 review for a number of years and that this has resulted in important enhancements in their capital frameworks and operating practices.

On the other hand, the IMF has not been subject to a similar review despite the fact that its operations have had to undergo possibility even more extensive revisions.

Daniel D. Bradlow is Professor/Senior Research Fellow, Centre for the Advancement of Scholarship at the University of Pretoria.

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The G20 Johannesburg Summit will be the twentieth meeting of the Group of Twenty (G20), a meeting of heads of state and government scheduled to take place from 22 to 23 November 2025. It will be the first G20 summit held in Johannesburg, South Africa and on the African continent.

By Danny Bradlow
PRETORIA, South Africa, Mar 11 2025 (IPS)

South Africa took over the presidency of the G20 at the end of 2024. Since then the world has become a more complex, unpredictable and dangerous place.

The most powerful state in the world, the US, seems intent on undermining the existing order that it created and on demonstrating its power over weaker nations. Other influential countries are turning inward.

These developments raise concerns about how well mechanisms for global cooperation, such as the G20, can continue to operate, particularly those that work on the basis of consensual decision making.

What’s the G20’s purpose?

The G20 is a forum in which the largest economies in the world meet regularly to discuss, and attempt to address, the most urgent international economic and political challenges. The group, which includes both rich and developing countries, accounts for about 67% of the world’s population, 85% of global GDP, and 75% of global trade.

The G20, in fact, is a misnomer. The actual number of G20 participants in any given year far exceeds the 19 states and 2 international entities (the European Union and the African Union) that are its permanent members.

Each year they are joined by a number of invited “guests”. While there are some countries, for example Spain and the Netherlands, that are considered “permanent” G20 guests, the full list of guests is determined by the chair of the G20 for that year.

This year, South Africa has invited 13 countries, including Denmark, Egypt, Finland, Singapore and the United Arab Emirates. They are joined by 24 invited international organisations such as the International Monetary Fund, the World Bank and the United Nations and eight African regional organisations, among others.

The G20 should be understood as a process rather than a set of discrete events. Its apex is the annual leaders’ summit at which the participating heads of state and government seek to agree on a communiqué setting out their agreements on key issues. These agreements are non-binding and each of the participating states usually will implement most but not all the agreed points.

The communiqué is the outcome of a two track process: a finance track, consisting of representatives of the finance ministries and central banks in the participating counties, and a “sherpa” track that deals with more political issues. In total these two tracks will involve over 100 meetings of technical level.

Most of the work in each track is done by working groups. The finance track has seven working groups dealing with issues ranging from the global economy and international financial governance to financial inclusion and the financing of infrastructure. The sherpa track has 15 working groups dealing with issues ranging from development and agriculture to health, the digital economy, and education.

The agenda for the working group meetings is based on issues notes prepared by the G20 presidency. The issues notes will discuss both unfinished business from prior years and any new issues that the president adds to the G20 agenda.

The working group chairs report on the outcomes of these meetings to the ministerial meetings in their track. These reports will first be discussed in meetings of the deputies to the ministers. The deputies will seek to narrow areas of disagreement and sharpen the issues for discussion so that when they are presented at the ministerial meeting the chances of reaching agreement are maximised.

The agreements reached at each of these ministerial meetings, assuming all participants agree, will be expressed in a carefully negotiated and drafted communiqué. If the participants cannot agree, the minister chairing the meeting will provide a chair’s summary of the meeting.

These documents will then inform the communiqué that will be released at the end of the G20 summit. This final communiqué represents the formal joint decision of the participating heads of state and government.

The G20 process is supplemented by the work of 13 engagement groups representing, for example, business, labour, youth, think tanks, women and civil society in the G20 countries. These groups look for ways to influence the outcomes of the G20 process.

What is the G20 troika and how does it operate?

The G20 does not have a permanent secretariat. Instead, the G20 president is responsible for organising and chairing the more than 100 meetings that take place during the year. The G20 has decided that this burden should be supported by a “troika”, consisting of the past, present and future presidents of the G20. This year the troika consists of Brazil, the past chair; South Africa, the current chair; and the US, the future chair.

The role of the troika varies depending on the identity of the current chair and how assertive it wishes to be in driving the G20 process. It will also be influenced by how active the other two members of the troika wish to be.

The troika helps ensure some continuity from one G20 year to another. This is important because there is a significant carryover of issues on the G20 agenda from one year to the next. The troika therefore creates the potential for the G20 president to focus on the issues of most interest to it over a three-year period rather than just for one year.

How successful has the G20 process been?

The G20 is essentially a self-appointed group which has designated itself as the “premier forum for international economic cooperation”.

The G20 was first brought together during the Asian financial crisis in the 1990s. At that time, it was limited to a forum in which ministers of finance and central bank governors could meet to discuss the most important international economic and financial issues, such as the Asian financial crisis.

The G20 was elevated to the level of heads of state and government at the time of the 2008 global financial crisis.

The G20 tends to work well as a cooperative forum when the world is confronting an economic crisis. Thus, the G20 was a critical forum in which countries could discuss and agree on coordinating actions to deal with the global financial crisis in 2008-9.

It has performed less well when confronted with other types of crises. For example, it was found wanting in dealing with the COVID pandemic.

It has also proven to be less effective, although not necessarily totally ineffective, when there is no crisis. So, for example, the G20 has been useful in helping address relatively technical issues such as developing international standards on particular financial regulatory issues or improving the functioning of multilateral development banks.

On other more political issues, for example climate, food security, and funding the UN’s sustainable development goals, it has been less effective.

There’s one less obvious, but nevertheless important, benefit. The G20 offers officials from participating countries the chance to interact with their counterparts from other G20 countries. As a result, they come to know and understand each other better, which helps foster cooperation between states on issues of common interest.

It also ensures that when appropriate, these officials know whom to contact in other countries and this may help mitigate the risk of misunderstanding and conflict.

These crisis management and other benefits would be lost if the G20 were to stop functioning. And there is currently no alternative to the G20 in the sense of a forum where the leading states in the world, which may differ on many important issues, can meet on a relatively informal basis to discuss issues of mutual interest.

Importantly, the withdrawal of one G20 state, even the most powerful, should not prevent the remaining participants from using the G20 to promote international cooperation on key global challenges.

In this way it can help manage the risk of conflict in a complex global environment.

Source: The Conversation AFRICA

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In a powerful appeal to the world’s largest economies during the G20 Summit, November 2024, UN Secretary-General António Guterres called for urgent climate action and reform of international institutions, warning that current systems are failing to meet global challenges. Credit: UN Photo/Gustavo Stephan

By Danny Bradlow
PRETORIA, South Africa, Feb 19 2025 (IPS)

US president Donald Trump’s recent actions seem designed to reassert American power and demonstrate that it is still the dominant global power and is capable of bullying weaker nations into following America’s lead.

He has shown contempt for international collaboration by withdrawing from the UN climate negotiations and the World Health Organization. His officials have also indicated that they will not participate in upcoming G20 meetings because he does not like the policies of South Africa, the G20 president for 2025.

In addition, he’s shown a lack of concern for international solidarity by halting US aid programmes and by undermining efforts to keep businesses honest. He has demonstrated his contempt for allies by imposing tariffs on their exports.

These actions demand a response from the rest of the international community that mitigates the risk to the well-being of people and planet and the effective management of global affairs.
My research on global economic governance suggests that history can offer some guidance on how to shape an effective response.

Such a response should be based on a realistic assessment of the configuration of global forces. It should seek to build tactical coalitions between state and non-state actors in both the global south and the global north who can agree on clear and limited objectives.

The following three historical lessons help explain this point.

Cautionary lessons

The first lesson is about the dangers of being overoptimistic in assessing the potential for change. In the late 1960s and early 1970s, the US was confronting defeat in the war in Vietnam, high inflation and domestic unrest, including the assassination of leading politicians and the murder of protesting students.

The US was also losing confidence in its ability to sustain the international monetary order it had established at the Bretton Woods conference in 1944.

In addition, the countries of the global south were calling for a new international economic order that was more responsive to their needs. Given the concerns about the political and economic situation in the US and the relative strength of the Soviet bloc at the time, this seemed a realistic demand.

In August 1971, President Richard Nixon, without any international consultations, launched what became known as the Nixon Shock. He broke the link between gold and the US dollar, thereby ending the international monetary system established in 1944. He also imposed a 10% surcharge on all imports into the US.

When America’s European allies protested and sought to create a reformed version of the old monetary order, US treasury secretary John Connolly informed them that the dollar was our currency but your problem.

Over the course of the 1970s, US allies in western Europe, Asia and all countries that participated in the old Bretton Woods system were forced to accept what the US preferred: a market-based international monetary system in which the US dollar became the dominant currency.

The US, along with its allies in the global north, also defeated the calls for a new international economic order and imposed their neo-liberal economic order on the world.

The second cautionary lesson highlights the importance of building robust tactical coalitions. In 1969, the International Monetary Fund member states agreed to authorise the IMF to create special drawing rights, the IMF’s unique reserve asset.

At the time, many IMF developing country member states advocated establishing a link between development and the special drawing rights. This would enable those countries most in need of additional resources to access more than their proportionate share of special drawing rights to fund their development.

All developing countries supported this demand. But they couldn’t agree on how to do it. The rich countries were able to exploit these differences and defeat the proposed link between the special drawing rights and development.

As a result, the special drawing rights are now distributed to all IMF member states according to their quotas in the IMF. This means that most allocations go to the rich countries who do not need them and have no obligation to share them with developing countries.

A third lesson arises from the successful Jubilee 2000 campaign to forgive the debts of low-income developing countries experiencing debt crises. This campaign, supported by a secretariat in the United Kingdom, eventually involved: civil society organisations and activists in 40 countries a petition signed by 21 million people and governments in both creditor and debtor countries.

These efforts resulted in the cancellation of the debts of 35 developing countries. These debts, totalling about US$100 billion, were owed primarily to bilateral and multilateral official creditors.

They were also a demonstration of the political power that can be generated by the combined actions of civil society organisations and governments in both rich and poor countries.

They can force the most powerful and wealthy institutions and individuals in the world to accept actions that, while requiring them to make affordable sacrifices, benefit low-income countries and potentially poor communities within those states.

What conclusions should be drawn?

We shouldn’t under-estimate the power of the US or the determination of the MAGA movement to use that power. However, their power is not absolute. It is constrained by the relative decline in US power as countries such as China and India gain economic and political strength.

In addition, there are now mechanisms for international cooperation, such as the G20, where states can coordinate their actions and gain tactical victories that are meaningful to people and planet.

But gaining such victories will require the following:

Firstly, the formation of tactical coalitions that include states from both the global south and the global north. If these states cooperate around limited and shared objectives they can counter the vested interests around the world that support Trump’s objectives.

Secondly, a special kind of public-private partnership in which states and non-state actors set aside their differences and agree to cooperate to achieve limited shared objectives. Neither states alone nor civil society groups alone were able to defeat the vested interests that opposed debt relief in the late 1990s. Working together they were able to defeat powerful creditor interests and gain debt relief for the poorest states.

Thirdly, this special partnership will only be possible if there’s general agreement on both the diagnosis of the problem and on the general contours of the solution. This was the case with the debt issue in the 1990s.

There are good candidates for such collaborative actions. For example, many states and non-state actors agree that international financial institutions need to be reformed and made more responsive to the needs of those member states that actually use their services but lack voice and vote in their governance.

The institutions also need to be more accountable to those affected by their policies and practices. They also agree that large corporations and financial institutions should pay their fair share of taxes and should be environmentally and socially responsible.

The urgency of the challenges facing the global community demands that the world begin countering Trump as soon as possible. South Africa as the current chair of the G20 has a special responsibility to ensure that this year the G20, together with its engagement groups, acts creatively and responsibly in relation to people and planet.

Source: Conversation Africa

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Excerpt:

A police officer walks after using tear gas to disperse protesters during a demonstration over police killings of people protesting against Kenya's proposed finance bill in Nairobi, June 27, 2024. Credit: Voice of America (VoA)

By Danny Bradlow
PRETORIA, South Africa, Jul 5 2024 (IPS)

The recent Kenyan protests are a warning that the International Monetary Fund (IMF) is failing. The public does not think it is helping its member countries manage their economic and financial problems, which are being exacerbated by a rapidly changing global political economy.

To be sure, the IMF is not the only cause of Kenya’s problems with raising the funds to meet its substantial debt obligations and deal with its budget deficit. Other causes include the failure of the governing class to deal with corruption, to spend public finances responsibly and to manage an economy that produces jobs and improves the living standards of Kenya’s young population.

The country has also been hammered by drought, floods and locust infestations in recent years. In addition, its creditors are demanding that it continue servicing its large external debts despite its domestic challenges and a difficult international financial and economic environment.

Danny Bradlow

Unfortunately, Kenya is not an isolated case. Twenty-one African countries are receiving IMF support. In Africa, debt service, on average, exceeds the combined amounts governments are spending on health, education, climate and social services.

The tough conditions attached to IMF financing have led the citizens of Kenya and other African countries to conclude that a too powerful IMF is the cause of their problems. However, my research into the law, politics and history of the international financial institutions suggests the opposite: the real problem is the IMF’s decline in authority and efficacy.

Some history will help explain this and indicate a partial solution.

The history

When the treaty establishing the IMF was negotiated 80 years ago, it was expected to have resources equal to roughly 3% of global GDP. This was to help deal with the monetary and balance of payments problems of 44 countries. Today, the IMF is expected to help its 191 member countries deal with fiscal, monetary, financial and foreign exchange problems and with “new” issues like climate, gender and inequality.

To fulfil these responsibilities, its member states have provided the IMF with resources equal to only about 1% of global GDP.

The decline in its resources relative to the size of the global economy and of its membership has at least two pernicious effects.

The first is that it is providing its member states with less financial support than they require if they are to meet the needs of their citizens and comply with their legal commitments to creditors and citizens. The result is that the IMF remains a purveyor of austerity policies. It requires a country to make deeper spending cuts than would be needed if the IMF had adequate resources.

The second effect of declining resources is that it weakens the IMF’s bargaining position in managing sovereign debt crises. This is important because the IMF plays a critical role in such crises. It helps determine when a country needs debt relief or forgiveness, how big the gap between the country’s financial obligations and available resources is, how much the IMF will contribute to filling this gap and how much its other creditors must contribute.

When Mexico announced that it could not meet its debt obligations in 1982, the IMF stated that it would provide about a third of the money that Mexico needed to meet its obligations, provided its commercial creditors contributed the remaining funds. It was able to push the creditors to reach agreement with Mexico within months. It had sufficient resources to repeat the exercise in other developing countries in Latin America and eastern Europe.

The conditions that the IMF imposed on Mexico and the other debtor countries in return for this financial support created serious problems for these countries. Still, the IMF was an effective actor in the 1980s debt crisis.

Today, the IMF is unable to play such a decisive role. For example, it has provided Zambia with less than 10% of its financing needs. It has been four years since Zambia defaulted on its debt and, even with IMF support, it has not yet concluded restructuring agreements with all its creditors.

What is to be done?

The solution to this problem requires the rich countries to provide sufficient finances for the IMF to carry out its mandate. They must also surrender some control and make the organisation more democratic and accountable.

In the short term, the IMF can take two actions.

First, it must set out detailed policies and procedures that explain to its own staff, to its member states and to the inhabitants of these states what it can and will do. These policies should clarify the criteria that the IMF will use to determine when and how to incorporate climate, gender, inequality and other social issues into IMF operations.

They should also describe with whom it will consult, how external actors can engage with the IMF and the process it will follow in designing and implementing its operations. In fact, there are international norms and standards that the IMF can use to develop policies and procedures that are principled and transparent.

Second, the IMF must acknowledge that the issues raised by its expanded mandate are complex and that the risk of mistakes is high.

Consequently, the IMF needs a mechanism that can help it identify its mistakes, address their adverse impacts in a timely manner and avoid repeating them.

In short, the IMF must create an independent accountability mechanism such as an external ombudsman who can receive complaints.

Currently, the IMF is the only multilateral financial institution without such a mechanism. It therefore lacks the means for identifying unanticipated problems in its operations when they can still be corrected and for learning about the impact of its operations on the communities and people it is supposed to be helping.

Danny Bradlow is Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of Pretoria

https://theconversation.com/the-imf-is-failing-countries-like-kenya-why-and-what-can-be-done-about-it-233825

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Credit: IMF

By Danny Bradlow
PRETORIA, South Africa, May 13 2024 (IPS)

South Africa will play an important international role in 2025 as president of the G20. The G20 is a group of 19 countries as well as the African Union and the European Union. Between them they represent 85% of global economy, 75% of world trade and 67% of global population. The G20 defines itself as the premier multilateral forum for international economic cooperation.

During its G20 presidential year, South Africa will host a summit of heads of state and government. It will also be responsible for organising and chairing about 200 meetings of ministers and officials. These will come from the G20 members, invited countries and international organisations like the International Monetary Fund and the World Bank.

The meetings will focus on issues such as the challenges facing the global economy and whether the current arrangements for global economic governance are able to respond effectively.

The G20 presidency, therefore, presents South Africa with an opportunity to promote reforms in global economic governance. But there are constraints. It will inherit an agenda from Brazil, the current G20 chair. And it will have to respond to developments in the current dynamic and complex global environment.

Danny Bradlow

There’s not necessarily agreement on how to prioritise these challenges. And, unfortunately, the views of the rich states, which prioritise issues like carbon emissions, dominate the discussions. For example, the World Bank highlighted the fact that, in the 2023 financial year, it increased the funds loaned for climate-related purposes by more than 20%, allocating 41% of all its lending to climate.

But its own survey of its borrower countries shows that climate ranks number 11 on the list of priorities of its borrower states. Health, education, agriculture and food security, and water and sanitation rank much higher. Nevertheless, at least two gaps became evident in the discussions.

The first relates to IMF reform. The second concerns the relationship between international organisations and their member states.

South Africa should aim to fill these gaps. It should encourage the G20 to commission two studies on the scale and scope of the challenges that the international community faces, and propose some responses. Ideally, it should convince the G20 to commission these studies in 2024 so that it can begin discussing policy responses in 2025.

This kind of approach has been effective. Over the last few years, the multilateral development banks have been the subject of G20-commissioned studies. This has led to proposals designed to make them “bigger and better”.

Shortcomings

The need for IMF reform is becoming more urgent. It is adapting its operations to deal with the macro-economic impacts of issues like climate, gender and inequality. The IMF has created a Resilience and Sustainability Trust that is providing financing to 18 countries, primarily for adaptation. It is reviewing its Debt-Sustainability Framework for Low-Income Countries so that it incorporates these “new” issues.

These changes are being made in an opaque and unpredictable way, however. The IMF has not made publicly available the principles and procedures it uses when deciding what aspects of these “new” issues to take on.

It can’t accurately assess the full impacts of these issues unless it understands how communities, workers, businesses and civil society organisations will respond to the social and environmental impacts of specific policy and fiscal initiatives with macroeconomic implications. It cannot gain this information without consulting these groups.

This means it must engage more with a broader range of stakeholders than it did when it focused exclusively on more traditional macroeconomic and financial stability concerns. These new issues, therefore, raise questions about the appropriate form for the relationship between the IMF and its member states.

At the spring meetings, the Development Committee of the World Bank and the IMF “reiterated the importance of accountability mechanisms in enhancing development outcomes and stimulating internal learning and feedback.”

Yet the IMF remains the only international financial institution without an independent accountability mechanism.

The second gap relates to the fact that developing countries are spending more on external debt service than on health and education. This is undermining their efforts to deal with climate change, inequality and sustainable development goals. Some discussants also regretted that there was a net outflow of funds from the global south to the global north.

As some have noted, the amount of funding committed to new development financing initiatives by rich countries is paltry compared to what’s needed. This has led, for example, economic ministers from Brazil, Germany, South Africa and Spain to call for a global tax on billionaires.

This is an important and creative idea. But the proposal raises difficult questions about state sovereignty and about the design of the institutions of global governance.

What’s needed

While multilateral development banks have been the subject of G20-commissioned studies, the IMF has not undergone a similar examination.

South Africa should commission a group of experts to study how the IMF should change to take on these new issues. The study should look at IMF governance, operational policies and practices, and its financial needs. The purpose would be to identify the current shortcomings in structures and functions.

Experts should also think of ways to make the IMF more responsive to the needs and priorities of all its member states and their citizens.

Second, South Africa should call for a study of how best to divide responsibility between states and the international financial institutions. This is particularly important when it comes to the environmental and social impacts of operations.

The purpose would be to understand how the roles and functions of these institutions are evolving and how this is affecting their relations with their member states. The study could propose ways to ensure that the structure and functions of institutions are both respectful of state sovereignty and appropriate for the responsibilities that the institutions are assuming.

Raising a global wealth tax for developmental purposes could be one example used in this study.

Danny Bradlow is a Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of Pretoria. In addition to his position at the University of Pretoria, he is also a Compliance Officer in the Social and Environmental Compliance Unit of the UNDP and Co-Chair of the Academic Circle on the Right to Development, which advises the UN Special Rapporteur on the Right to Development.

Source: The Conversation– a nonprofit, independent news organization dedicated to unlocking the knowledge of experts for the public good. The University of Pretoria provides funding as a partner of The Conversation AFRICA.

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A mobile money stand in Accra, Ghana. Credit: IMF/Andrew Caballero-Reynolds

By Danny Bradlow
PRETORIA, South Africa, Feb 28 2024 (IPS)

It hasn’t been easy for African states to finance their developmental and environmental policy objectives over the past few years.
Recent events suggest that the situation may be improving. For the first time in two years, three African states have been able to access international financial markets, albeit at high interest rates. Kenya, for example, is now paying over 10% compared to about 7% in 2014.

Many African countries continue to face challenging sovereign debt situations. Total external debts as a share of Africa’s export earnings increased from 74.5% in 2010 to 140% in 2022.

In 2022, African governments had to allocate about 12% of their revenues to servicing their debt. Between 2019 and 2022, 25 African governments allocated more resources to servicing their total debts than to the health of their citizens.

And in late 2023 the International Monetary Fund estimated that over half the low income African countries were either potentially or actually experiencing difficulties paying their debts.

This suggests that it will be very difficult for Africa to raise the US$1.6 trillion that the Organisation for Economic Cooperation and Development (OECD) estimates it needs to reach the sustainable development goals (SDGs) by 2030.

One of the lessons of the COVID pandemic and the climate negotiations is that Africa can’t count on the global community to provide it with sufficient new funds or with debt relief to deal with either its development needs or the consequences of crises such as pandemics or extreme weather events.

Its official bilateral creditors appear more focused on their own needs and on other parts of the world than on Africa. Commercial creditors are happy to provide financing when conditions are favourable and African debt can help them satisfy their investment mandates.

But they are less forthcoming when the going gets tough and the risks associated with the transaction – and for which they have been compensated – actually materialise.

This suggests that Africa needs to advocate more aggressively for its own interests. This year offers some good opportunities to promote a more effective approach to African debt.

Careful planning needed

There are two international conferences where global economic governance will be on the agenda. This is also the first year that the African Union participates as a full member in the G20. In addition, South Africa, the G20 chair in 2025, currently serves on the troika that manages the G20 process. (G20 Finance Ministers are scheduled to meet in Brazil 28-29 February).

Debt and development finance will be an important topic in all these forums. African representatives can use their participation to advocate for a new approach to sovereign debt that is more responsive to African needs and concerns. They can also lobby other participating states and non-state actors for their support.

But African states will need to plan carefully. Their starting point should be the well recognised fact that the current sovereign debt restructuring process is not working for anyone. The G20 agreed a Common Framework that was supposed to help resolve the sovereign debt crises in low income countries.

Four African countries applied to have their debts restructured through the framework. Despite years of negotiations, it has failed to fully resolve the debt crisis in three of them.

Countries outside the Common Framework, such as Sri Lanka, have not managed to fully resolve their debt crises either. This is costly for both debtors and creditors. It is therefore in everyone’s interest to look for a new approach.

This requires all parties to be willing to entertain new ideas and to experiment with new approaches to old problems. African states should offer their own innovative proposals. They should also state that they are willing to take on new responsibilities if their creditors are willing to do the same.

They can remind their creditors that these experiments would not be taking place in a vacuum. They can be guided by the many existing, but under-utilised, international norms and standards applicable to responsible sovereign debt transactions, for example the Unctad principles on responsible sovereign debt transactions. Some of these relate to the conduct of sovereign borrowers.

Others focus on responsible lending behaviour and are often cited by creditors in their own policies dealing with environmental and social issues, social responsibility or human rights.

By basing any new approach on these international norms and standards, both debtors and creditors will merely be agreeing to implement principles that they have already accepted.

Working from this starting point, African states should make three specific proposals.

Concrete proposals

First, they should commit to making both the process for incurring debts and the terms of all their public debt transactions transparent.

This will ensure that their own citizens understand what obligations their governments are assuming on their behalf. It will encourage governments to adopt responsible borrowing and debt management practices.

They should also agree that they can be held accountable for their failure to comply with these transparent and responsible sovereign debt practices and procedures.

Second, African states should point out that there is a fundamental problem with a sovereign debt restructuring process that only focuses on the contractual obligations that the debtor state owes its creditors.

This focus means, in effect, that servicing its debt obligations will trump the debtor state’s efforts to deal with the country’s vulnerability to climate change and the loss of biodiversity, and with its poverty, inequality and unemployment challenges.

This follows from the fact that their creditors can use the restructuring process to force sovereign borrowers in difficulty, unlike corporations in bankruptcy, to pay those who lend them money without regard, for example, to the impact on their obligations to pensioners, public sector employees or the welfare of their citizens.

This exclusive focus on debt contracts is inconsistent with the international community’s interest in addressing global challenges like climate and inequality.

This problem can be resolved if both creditors and debtors agree that they will adopt an approach to debt negotiations that incorporates the financial, economic, social, environmental, human rights and governance dimensions of sovereign debt crises.

Third, African states should propose that their creditors publicly commit to base the new approach to sovereign debt on an agreed list of international norms and standards relevant to responsible international financial practices.

These will include those dealing with transparency, climate and environmental issues, and social matters, including human rights.

Source: The Conversation

University of Pretoria provides funding as a partner of The Conversation AFRICA.

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Food insecurity is affecting millions of people in Burkina Faso. Credit: UNICEF/Vincent Treameau

By Danny Bradlow and Magalie Masamba
PRETORIA, South Africa, May 19 2022 (IPS)

The COVID pandemic has had a profoundly negative impact on Africa’s sovereign debt situation. Currently, 22 countries are either in debt distress or at high risk of debt distress.

This means that African governments are struggling to pay the debts that they incurred on behalf of their states. For example, Mozambique and Zimbabwe are already in debt distress. Others at high risk include Malawi, Zambia and Comoros.

This situation is likely to be exacerbated by the war between Russia and Ukraine. The conflict is causing commodity prices, particularly food and gasoline, to rise. It is also disrupting the supply chains of critical goods like fertilisers.

The ability of countries to manage their debt is complicated by the changing composition of the debt. They now owe more money to a broader range of creditors.

In 2020, sub-Saharan Africa had a total external debt stock of US$702.4 billion, compared to US$380.9 billion in 2012. The amount owed to official creditors, including multilateral lenders, governments and government agencies, increased from about US$119 billion to US$258 billion.

Danny Bradlow

In addition, the amount of bonds issued by African states on international markets has tripled in the last 10 years. These bonds are held by a broad range of investors such as insurance companies, pension funds, hedge funds, investment banks and individuals.

In our new book we address the challenges that these changes have created for sovereign debt management for the 16 countries in the Southern Africa Development Community.

We hope the book will stimulate debate among academics, activists, policymakers and practitioners on how Southern Africa Development Community should manage its debt. Five recommendations emerge from the contribution. These include the need for enhanced debt transparency and an approach to debt management that takes into account a host of factors beyond just finance.

The landscape

The book contains a series of essays initially presented in several virtual workshops held in 2020. The participants sought to understand the debt challenges facing countries in the Southern Africa Development Community. They also offered policy-oriented recommendations for dealing with them.

Magalie Masamba

They pay attention to the impact of the COVID-19 pandemic on the debt situation but also recognise that it is only one factor contributing to the difficult debt situation in the region. Thus, they also focus on the broader domestic and international factors that are shaping debt management in the region.

In an effort to chart a way forward, the contributing authors addressed the following four themes:

• The impact of structural changes in the global economy on the Southern Africa Development Community debt landscape. An example is the increasing importance of finance in the global economy.
• The challenges of sovereign debt management and restructuring in the region;
• The implications of the lack of transparency on the accumulation and use of sovereign debt;
• Options for incorporating human rights and social considerations into sovereign debt renegotiations and restructuring.

Contributors make five key recommendations:

The first concerns debt transparency. The recommendation is that countries in the region should adopt comprehensive debt data disclosure requirements and state borrowing procedures that are transparent and participatory. The aim would be to facilitate holding relevant decision makers accountable.

Debt transparency is the cornerstone of reforming debt management. Sovereign debtors should follow well publicised, predictable and binding legal procedures in incurring new financial obligations. In addition, they should disclose the amount and contractual terms of their loans. This should include any arrangements for enhancing the security of the loan.

An example is resource-backed loans. In these loans repayment is either made in natural resources or is guaranteed by the revenues generated by the sale of the natural resource.

Sovereign debtors should disclose this information to their creditors, the multilateral financial institutions of which they are member states. They should also make the information publicly available through national platforms.

Good governance. This involves strengthening national debt management policies to deal with issues of governance.

Transparency on its own won’t ensure responsible borrowing. Debt management frameworks and practices should conform to all the principles of good governance. The list includes transparency, participation, accountability, reasoned decision-making and effective institutional arrangements.

Legal predictability. This involves strengthening contractual provisions in debt contracts.
Debt is a contractual relationship. It is therefore important – for debtors and creditors – to enter into contracts that are as comprehensive as possible. This means contracts should fairly allocate risks between the parties.

This would include, for example, accommodating who is better able and more willing to accept the risks. In addition, contracts should provide the parties with clear answers to issues that could arise between them.

This would require policymakers providing guidance to their debt managers on the terms and conditions they can accept in contractual negotiations.

Comparability of treatment during restructuring. This means that, when needed, all creditors should participate on comparable terms in any sovereign debt restructuring. Southern Africa Development Community sovereign debtors can improve creditor confidence by offering all creditors comparable treatment. This would give them comfort that any relief they provided would benefit the debtor rather than other creditors.

This should facilitate the debtor’s efforts to reach agreement with all its creditors.

A comprehensive approach. Sovereign debt is not just a financial issue. It has implications for the social, political, economic, cultural and environmental situation in the debtor country. It requires a comprehensive approach to debt restructuring that incorporates all relevant stakeholders.

This includes citizens of the debtor states, multilateral creditors, bilateral creditors, and private creditors such as bondholders, institutional investors of various sorts and commercial banks.
It also requires that all necessary issues are addressed. These range from financial sustainability to the social, human rights and environmental impacts of the restructuring.

The sovereign debtor and its creditors must therefore seek to effectively engage with each of these actors and with all of these issues.

These recommendations show that there is a need for more innovative approaches to sovereign debt. One possible approach is the DOVE (Debts of Vulnerable Economies) Fund. It will use funds raised from all the stakeholders in sovereign debt to buy the bonds of African debtors in distress and commit to only agree to a debt restructuring that complies with a set of published principles based on international standards that support a comprehensive approach to the debt restructuring.

Source: The Conversation which was founded in Melbourne, Australia in 2011 and now operates as a global network of sites with dedicated teams working in Australia, the US, the UK, France, Africa, Indonesia, Spain and Canada.
https://theconversation.com/debt-distress-in-africa-biggest-problems-and-ways-forward-182716

Danny Bradlow SARCHI Chair is funded by the National Research Foundation. He received funding from the Open Society Initiative for Southern Africa (OSISA) for this book project. Magalie Masamba receives funding from Danny Bradlow’s SARCHI Chair and Oxfam South Africa. Magalie is a co-editor and co-author in this book project funded by the Open Society Initiative for Southern Africa (OSISA).

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Credit: UNICEF/Andrew Esiebo

By Danny Bradlow
JOHANNESBURG, South Africa, May 19 2020 (IPS)

Sub-Saharan Africa has a debt problem. According to the most recent World Bank debt statistics, in 2018 the region had about $493 billion in long term external debt.

About one third, $117 billion, was in the form of tradeable bonds. About half of the $17 billion in interest payments Africa made in 2018 was to these bondholders.

To put this debt in perspective: In 2018, the region’s total external debt was equal to 36% of its gross national income. Debt service payments that year contributed to the region’s 3.6% of GDP budget deficit.

A year later, in 2019, many African countries spent more money servicing their debts than they did on health.

Needless to say, Africa’s debt problem is complicating its efforts to deal with the profound social, health, and economic impacts of the COVID-19 pandemic.

The international community has taken some steps to help Africa deal with this issue. The G-20 countries have agreed to a debt payment standstill on all debts owed to official creditors based in their countries.

Some of these countries are also contributing to a fund to help the poorest countries meet their obligations to the IMF. Unfortunately, the international community has not convinced bondholders to contribute to this effort.

There are several reasons for this failure. First, the bondholders are a large and diverse group. They each have their own investment strategies and view of their responsibilities to their clients, which include both individuals and companies.

Second, there is variation in the terms and conditions of the different bonds that need to be reconciled and incorporated into one regional relief package.

Third, different African countries have different views on what they need to deal with the crisis in their country. Some want maximum debt relief. Others, more confident in their ability to service their debts and weather the crisis, want to avoid the “guilt by association” that would attach if they are too closely associated with those countries seeking debt relief.

Finally, there is a risk that speculators will buy these bonds, which trade on an open market, at their current discounted prices and seek to enforce their original terms against the debtor countries.

World Health Organization, Burundi

History teaches that this last risk is very real. In the 1990 many African countries had unsustainable debts. They owed $255 billion to their official creditors and $28 billion (17% of the total) to private creditors.

Bilateral and multilateral creditors launched the HIPC initiative in 1996 to help highly indebted poor countries. Thirty-one African countries benefited from this debt forgiveness. Private creditors did not participate.

Unfortunately, this created an opportunity for speculators, now more accurately called vulture funds. They bought the debts of countries like Zambia, the Democratic Republic of Congo, Ethiopia and Uganda very cheaply.

They demanded that the countries meet their contractual obligations and pay them in full. They sued any country that refused. This strategy earned them returns of between 300% and 2,000%.

To date, they have used this strategy – or are using it – against approximately 15 African countries.

Any effort to help Africa deal with its bondholder problem must satisfy three objectives. First, it must offer immediate debt relief to those African countries that need it in order to deal with the COVID induced crisis that they are currently experiencing.

This means that Africa cannot wait for the inevitably time-consuming and laborious negotiating process with a reluctant group of bondholders to produce a result.

Second, it should mitigate the risk that the benefits of the debt relief will be captured by the vulture funds.

Third, it needs to ensure that after the crisis abates African states will not either be saddled with undue debt burdens or denied access to the financing they need to restart their economies and promote the sustainable development of their populations.

Fortunately, there is a way for Africa to meet all three objectives. It should create a special purpose vehicle –the DOVE (Debts of Vulnerable Economies) fund — that will demonstrate to the financial markets how a responsible creditor treats African debtors in crisis.

The DOVE fund will do three things.

First, it will buy African bonds on the open market at the prevailing discounted prices. It will then notify all other bondholders that it expects to participate in all future bondholder discussions about the management of African bonds.

Second, it will inform both the debtor country and the financial markets that it commits to hold its bonds and to implement a standstill on any payments due on them until the global health crisis abates. The fund will also pledge that once the global economy begins to grow again it will work with African debtors to ensure that the debt does not become an unreasonable burden on their efforts to rebuild their economies.

It will stipulate that any future debt renegotiations will be consistent with all applicable international standards such as the UN Guiding Principles on Business and Human Rights, the Principles on Responsible Investment, and the UNCTAD Principles on Promoting Responsible Sovereign Lending and Borrowing.

Third, the DOVE fund will advocate that all private sector creditors should participate in a comparable standstill, both on debt payments and bond trading, and should applying the same principles as the DOVE fund in determining what to do with the debt of the participating countries after the crisis ends.

It can remind them that most of the leading financial institutions in the world are signatories to the Principles on Responsible Investment, and many of them have policies that require them to be socially and environmentally responsible in all their operations. Many of them also have human rights policies that confirm that they respect international human rights.

In addition, many of them have acknowledged that their companies should serve the interests of all their stakeholders and should not prioritize the interests of their shareholders. Their stakeholders include their borrowers and those innocent third parties – such as citizens – affected by their actions and decisions.

The DOVE fund should also have the following characteristics so that it can function effectively.

First, it must be independent of both creditors and debtors. To demonstrate its independence the fund should be managed by an independent board representing all stakeholders. These include the debtor states and their citizens, the creditors and the investors in the DOVE fund.

This board would hire a manager to implement its strategy for assisting the debtor countries and advocating for a new approach to all other bondholders.

Second, the fund can be established in a neutral jurisdiction but it should be based at an African institution such as the African Development Bank.

Third, the fund should only buy the bonds of African countries that choose to participate in its operations. Some countries, given the terms of their bonds and their ability to meet their contractual obligations, might be wary of participating in these operations. They may fear that it will complicate their future access to financing.

Fourth, the fund needs to be large enough to be an influential voice in any discussion among bondholders about the treatment of the participating African countries’ debts. It should raise its resources from a range of sources including governments, international organizations, foundations, financial institutions, companies and individuals.

The purpose of raising funds from foundations, companies and individuals is both political and financial. Their involvement will increase the pressure on other bondholders to comply with the DOVE fund’s objectives.

The DOVE fund could encourage these groups to participate by issuing a social impact bond which would only offer holders a return that is linked to the post-crisis growth rate of sub-Saharan Africa and/or to the level of debt payments actually received by the DOVE fund after the crisis.

Such bonds are likely to appeal to African individuals and companies, members of the African diaspora and Africa’s friends who are interested in contributing to its efforts to deal with the profound COVID-19 induced crisis that the continent is facing.

Financial institutions could contribute “in kind” by making a binding commitment to participate in any debt payment and to comply with the objectives of the DOVE fund.

Clearly, the biggest portion would need to come from governments and international organizations.

One way governments could contribute is by donating a portion of their current holdings of special drawing rights, the International Monetary Fund’s reserve asset, to be used by the DOVE fund.

The IMF could contribute through a sale of a portion of its gold holdings, which are currently valued at about $138 billion at current market prices and at about $4.5 billion at historical cost.

Africa is facing a profound crisis that could set its development back a generation. It needs a solution to its debt problems that makes sure that no future African leader is forced to ask, as did former Tanzanian president Julius Nyerere: Should we really let our people starve so we can pay our debts?

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