In this exclusive interview, Claver Gatete, Executive Secretary of the UN Economic Commission for Africa (ECA), delves into the growing challenges of Africa’s rising debt amidst global crises. He explores the complexities of securing sustainable financial solutions, including reforming the international financial architecture, enhancing domestic resource mobilization, and addressing critical development priorities for the continent. As the 2025 Financing for Development Conference in Spain approaches, Gatete outlines Africa’s key objectives, from debt relief to energy transition, and highlights innovative financing avenues such as green bonds and carbon credits.
The interview is edited for clarity:
What are the implications of the rising debt for African countries and what solutions would you propose?
Our debt goes up after each major shock. For example, debt increased during the 2008—2009 global financial crisis, followed by a surge in fuel prized due to the Arab Spring. Next came the COVID-19 pandemic, and soon after, the war in Ukraine. Now, we have the conflict in the Middle East. The combination of all these meant countries had to borrow more.
Global crises divert funds away from development and toward managing conflict, driving up fuel and food prices and contributing to inflation.
This is not the first time that countries are facing high-level debt but there has always been a solution, mostly because most of the debt was owed to the Paris Club, Bretton Woods institutions [IMF and the World Bank], and regional development banks. It was easy to bring people together to tackle the problem.
This time, debt is increasingly owed to non-Paris Club creditors, significantly China, India, the Arab world, Türkiye, and so on. It is difficult for all the creditors to sit together and propose a solution.
Also, countries’ economies have grown since the end of the World War II, but resources have not kept pace. Concessional resources that developing countries used to access have not increased at the same rate as economic growth.
In addition, funding from international financial institutions is often insufficient, pushing countries to supplement with a mix of concessional resources, non-concessional resources, and private lending.
Coordinating these funding sources is difficult. This is where the G-20 Common Framework for Debt Treatments comes in, though it has complicated elements. For example, previously, countries in negotiation were not required to make interest payments but this time they must keep paying interest even during negotiations, which now take much longer. We’ve seen this prolonged process with Ghana, Zambia, and Ethiopia.
How long do these negotiations take?
It can take years, depending on how quickly the countries you owe the money agree or disagree.
How does it affect African economies?
Most of the debts, if not all, are in foreign currencies, which means African countries cannot repay in local currency.
This becomes a problem if the local currency is weak, as debt is usually repaid through the reserves, which depend on foreign currency inflows, often in the form of aid. Also, when you are increasing exports, you are earning foreign currency.
However, currently, aid and foreign direct investment have decreased, and exports are not growing as expected.
Comparing foreign currency earnings with foreign currency payments reveals significant macroeconomic implications. It means the central banks lack the capacity to support the banking system for importers of goods and services.
Secondly, debt repayment limits the fiscal space for spending in other sectors. Usually, the social safety nets and sectors such as education and healthcare are ring-fenced. But limited fiscal space affects social safety nets and we don’t have advanced welfare systems like rich countries do.
As inflation goes up, wages remain stagnant, and people become poorer.
Are there any solutions to these challenges?
Yes. The first step is to address the urgent issue of debt. The second step is to tackle its root causes.
There is need to reform the international financial architecture. Without restructuring the global economy established after World War II, along with its governance, finance, shareholding, and other systemic issues, a lasting solution is difficult. That effort [reform] is led by the UN Secretary-General [António Guterres], trying to find a middle ground with the international financial institutions.
Domestic resource mobilization is also important, but it requires reforms in taxation, formalizing the informal sector which accounts for 82 per cent of total employment. Countries need to digitize their economies so everybody pays their fair share of taxes, and they must tackle illicit financial flows.
There is also the private sector, which relies on the banking system and capital markets for funding. Without functional capital markets or stock exchanges, the private sector has no way of getting money. Most of our banking systems are not rated, so borrowing is very expensive. That’s why the stock exchange is essential.
Another factor is credit rating. A better rating provides access to relatively cheaper resources and instills confidence in investors and lenders. That’s why we are working with Africa Peer Review Mechanism, the United Nations Development Programme (UNDP), and other partners to help countries build capacity and improve their credit ratings.
Since independence, only two out of 54 African countries have achieved an investment-grade rating.
Which are those countries?
Botswana and Mauritius.
How receptive are multilateral financial institutions to calls for reform of the global financial architecture, which is also a key element of the Pact for the Future?
They are feeling the pressure, but change takes time. It’s not just about the banking system or the financial institutions themselves; these institutions manage their shareholders’ funds. The shareholders are primarily the member countries. Some shareholders do not want to lose their controlling stakes.
For instance, in 2021 Africa received only 5 per cent (about $33 billion) out of the $650 billion of the IMF’s Special Drawing Rights.
Africa’s shareholding in the IMF is equivalent to that of Germany. Reforming this shareholding arrangement and allowing countries a larger share will solve this problem.
When it comes to reforms, we’ve seen the Addis Ababa, the Doha Declaration, and the Monterrey Consensus —essentially supporting poorer countries to overcome development hurdles. How can we be sure that change is possible this time?
Global crises and conflicts have made it harder, even for rich countries, to fulfil their commitments. Developed countries had pledged to give 0.7 per cent of their GNP as part of Official Development Assistance to developing countries, which includes many African countries. Very few countries met that obligation.
In 2009, developed countries pledged $100 billion per year by 2020 in climate finance to developing countries, which they didn’t fulfill.
Aid has declined, and 71 per cent of public climate finance is in loans. Everything we do in terms of innovative financing is, at the end of the day, another debt adding to existing debt.
We need lasting solutions, not just relying on reforming the global financial architecture because that will take time. That’s why we emphasize the need for domestic resource mobilization.
What will Africa’s priorities be at the Financing for Development Conference next year in Spain?
There are many. The ECA has been leading high-level negotiations, working with Africa’s finance ministers to address key issues, including debt.
Second, we need to consider what we do in terms of concessional resources, what role the banking system should play, and how to expand financial resources for developing countries.
Third, we need to address climate costs, currently consuming at least 5 per cent of Africa’s GDP.
Energy transition is also a priority. We are seeing all kinds of investments, yet we face challenges in investing in energy transition. When you ask countries to transition, the question arises—transition from what? Some countries don’t even have electricity or fossil fuel to transition from. Many African countries lack even basic electricity infrastructure yet are expected to transition without sufficient funding.
Of the 733 million people without access to electricity globally, 80 per cent are in Africa.
Africa received only 2 per cent of the $10 trillion invested globally in energy transition from 2015 to 2022.
Other priorities include addressing illicit financial flows, building consensus in reforming the international tax system.
Are there opportunities for Africa in green financing and carbon credits?
Definitely. We have innovative financing. We have green bonds, blue bonds, and carbon credits.
In Africa, carbon often sells for under $10 per tonne—sometimes as low as $5 per tonne— while prices in Europe and other places exceed $100 – $120 per tonne.
African countries lack the capacity to negotiate effectively. One of the things we are doing at the ECA is to assist countries in understanding the inputs for negotiations. For instance, we helped establish registries under the Congo Basin Climate Commission initiative involving 16 countries
Also, there are other mechanisms such as debt-for-carbon swaps, where carbon credits can be exchanged to reduce debt, and to fund important sectors like education and healthcare.
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