YAOUNDE, Cameroon / BARCELONA, Spain, November 24 (IPS) – When South Africa assumed the Presidency of the G20, debt sustainability was placed front and centre, with the promise to launch a Cost of Capital Commission. Many hoped that, with an African country at the helm, the G20 would finally deliver real solutions to the debt crisis gripping the Global South – particularly Africa.
A year later, the South African presidency drew to a close, and nothing has fundamentally changed. The G20 has once again failed, and it is time to look elsewhere for genuine solutions.
Africa’s debt crisis is deepening
Alarm bells have been ringing for years. Africa’s total debt stocks have more than doubled since 2021 to US$ 685.5 billion in 2023, driven in part by the economic fallout of the Covid-19 pandemic, with increasing cost of capital driving debt payments to record highs.
The African Leaders Debt Relief Initiative (ALDRI), spearheaded by eight former Heads of State, demands urgent debt relief, not as “charity” but as “an investment in a prosperous, stable, and sustainable future—for Africa and the global economy”.
While South Africa’s Presidency raised hopes for a change to real solutions by placing Africa’s debt crisis at the centre of the G20 agenda, the outcome has leaned towards more rhetoric than action.
The G20 has failed
If we want to find fair solutions to the increasing debt problems that plague African and other Global South countries, we should no longer expect forums like the G20 to deliver. They are dominated by creditors unlikely to reform a system that serves their own interests.
After four meetings of the Finance Ministers and Central Bank Governors of the G20, leading on its finance track, South Africa delivered in October a debt declaration. But it contained nothing new and did not provide any actionable commitments on what the G20 will do to solve the debt challenge.
Nothing was delivered either at last weekend’s G20 leaders’ summit in Johannesburg. No reform. No changes. Just a couple of reports, but no decisions at all. As the debt crisis worsens, the G20 remains paralysed and unable to agree even on minimum reforms of its own Common Framework.
This paralysis is structural. While it attempts to appear to be inclusive, the problem with the G20 is that it is not a truly multilateral and democratic institution, but an informal exclusive forum for dialogue among competing powers.
Geopolitical tensions, and particularly the US context, elevates the paralysis to another level. Since decisions are made by consensus, the result is always the minimum common denominator.
The failure of the Common Framework
Launched in late 2020, the G20 Common Framework, was meant to enable faster and fairer debt restructuring for low-income countries. Yet it continues to be highly inefficient. Restructuring processes are slow, debt reductions too shallow, and the sharing of responsibility between public and private creditors deeply unequal, as we’ve seen with Zambia.
Calls to reform the Common Framework have been reiterated by many governments and institutions, but the G20 was unable to deliver. The African Union, for instance, called for reforms including introducing a time-bound aspect, establishing a universally-accepted methodology for comparability of treatment, suspending debt payments during the whole debt restructuring process, expanding its eligibility criteria and establishing a legal mechanism to enforce compliance with restructuring agreements.
Yet it still seems that the G20 is not in the business of acting for the good of the people. Instead it continues to perpetuate creditor interests.
A better path exists: The United Nations
Fortunately, there is another path that provides the much-needed inclusive and democratic multilateral institutional framework to take the necessary reforms forward.
In July, UN Member States worldwide agreed, by consensus, to initiate an intergovernmental process to address the gaps in debt architecture. This process should lead to a UN framework Convention on Sovereign Debt, as supported by the African Union in the Lome Declaration on a Common Position on Africa’s Debt, and to establishing a multilateral sovereign debt resolution mechanism, long demanded by G77 countries.
In the same UN forum it was agreed to establish a borrowers platform, which “will offer debt-distressed countries a way to coordinate action and amplify their voice in the global financial system”.
This is not radical. As Ahunna Eziakonwa, Director of the Regional Bureau for Africa at the United Nations Development Programme (UNDP) put it recently, it is a “common sense and long overdue” process.
Yet, some creditor countries, including the European Union, are trying to derail the UN process, claiming it would duplicate G20 efforts. Siding with a status quo that is clearly not working is a political choice that condemns Africa and other Global South countries to greater poverty, inequality and climate destruction.
If rich countries are serious about supporting Africa and Global South countries to address the climate crisis and pursue sustainable development, they need to stop boycotting commitments agreed by consensus, and support the initiation of an intergovernmental process on debt architecture reform.
The G20 has reached its limits. The world cannot afford another decade of deadlock caused by the effectiveness of the Common Framework, while debt burdens soar. Now is the time to shift the centre of global debt governance.
Theophilus Jong Yungong is Interim Executive Director, African Forum and Network on Debt and Development (AFRODAD), and Iolanda Fresnillo is Policy and Advocacy Manager — Debt Justice, European Network on Debt and Development (Eurodad)
IPS UN Bureau
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