10-point plan for IMF and World Bank to end Africa’s debt crisis

12 April 2024 – Africa’s debt crisis risks spiralling out of control unless urgent action is taken by the International Monetary Fund and World Bank. This is the stark message of an open letter from over 40 leading economists and systems thinkers in advance of the Spring Meetings of the International Monetary Fund (IMF) and World Bank. 

The signatories, coordinated by Power Shift Africa and Earth4All, argue for immediate cancellation of debt in Africa, where the debt crisis is hitting hardest. In addition, the signatories also call for a fundamental reform of the international organisations and rules which are failing African countries, who spend more on debt servicing than on health and education. 

More than half the continent’s low-income countries are in debt distress or on the brink of it. Four African countries have already defaulted.

Because of crippling interest rates and unfair borrowing terms to African governments, most people in Africa live in countries that spend more on interest payments than on health, housing, education and climate action. Without immediate reforms, the world is consigning the poorest in Africa to a century of misery. This is the biggest crisis facing Africa today. But it is a crisis that has been caused by an international financial system that is outdated, immoral and unjust. And it is a crisis that is perpetuated by rich countries who consistently refuse to take bolder action on debt at the Annual and Spring Meetings of the World Bank and IMF.

“Transformative reform of the international financial system and ambitious debt relief, could unlock  Africa’s potential for leveraging its resources, capabilities and economies of scale to tackle poverty, restore its food sovereignty, unleash its renewable energy potential, and leapfrog into a century of justice, equity, and sustainable prosperity.  Our ten demands must be adopted by political leaders at the Spring Meetings if they are serious about signalling commitment to human dignity and global justice”.  said Fadhel Kaboub, Senior Advisor, Power Shift Africa and Member of the Earth4All Transformational Economics Commission.

“As humanity is rapidly losing the race to prevent planetary tipping points, so too are we failing in our global efforts to deal with worsening humanitarian impacts of conflict, extreme poverty and repeated exogenous shocks. One of the biggest drivers is the worsening global debt crisis crushing the lives of 3.3 billion, whose governments are forced to prioritise debt interest payments over essential investments such as the Sustainable Development Goals and a just energy transition.” said Sandrine Dixson-Declève, Co-President of The Club of Rome and Executive Chair of Earth4All.

The letter calls for 10 steps to secure financial stability in Africa and provide countries with more financial options for investment in the Sustainable Development Goals, the green energy transition and to ensure stability and reduce inequality for the region. 

1. Immediately cancel public external debt payments for all African countries. 
2. Transform biased credit rating practices of the big three credit rating agencies (S&P, Moody’s, Fitch). 
3. Commit to urgent reform of the G20 Common Framework (a recently-developed solution to coordinate debt restructuring). 
4. Urge private lenders to participate in debt reduction and rescheduling of loan repayments from low-income African countries to tackle the debt crisis.   
5. Honour commitments to reallocate the IMF’s Special Drawing Rights (SDRs) to vulnerable countries.  
6. Restore broken climate finance promises to support African countries’ climate goals estimated at approximately $2.8 trillion. 
7. Commit to a credible reform path for the global debt architecture.  
8. Pay climate finance debts owed by G20 countries in the form of unconditional grants and technology transfer.  Since low-income countries, especially in Africa, are owed at least $2.4 trillion in climate finance by 2030, they should withhold the equivalent of that debt until promises are fulfilled. 
9. Channel climate and development finance to strategic investments in regenerative agriculture and agroecology to restore Africa’s food sovereignty, renewable energy deployment for Africa’s development rather than for export. 
10. Stop promoting austerity conditions and promote bold, structural and transformative solutions at-scale, not small, superficial solutions. 

“The Spring Meetings must be a rallying cry for urgent action to address the root causes of the debt crisis and to commit to meaningful reform of the global financial system and debt architecture.   We urge wealthy countries to stop blocking serious reform efforts as they did at the 2023 Annual meetings. They must support proven solutions such as debt cancellation, removal of austerity conditions, fundamental reform of the G20 Common Framework, and increased mobilisation of domestic public resources through greater progressivity in domestic tax systems.” Concludes Declève.

Signatories include: 

Mohamed Adow, Founder and Director of Power Shift Africa 
Tasneem Essop, Executive Director, Climate Action Network-International 
Saliem Fakir, CEO, Africa Climate Foundation 
James K. Galbraith, The University of Texas at Austin 
Mo Ibrahim, Founder and Chair of the Mo Ibrahim Foundation, and Co-Founder and Co-Chair of the Africa Europe Foundation. 
Chenai Mukumba, Executive Director, Tax Justice Network Africa 
Fati N’zi-Hassane, Director of Oxfam in Africa 
Ann Pettifor, Director, Prime Economics Institute 
Alex Rafalowicz, Executive Director, Fossil Fuel Non-Proliferation Treaty Initiative 
Maria João Rodrigues,  President, Foundation for European Progressive Studies 
Paul Shrivastava, Professor,  Pennsylvania State University, Co-President, The Club of Rome 
Youba Sokona, Former Vice Chair of the IPCC and Honorary Professor at UCL