AfDB Launches Debt Management Forum for Africa to Tackle Rising Fiscal Challenges

The event convened key stakeholders including representatives from African Ministries of Finance, Central Banks, debt management offices, academics, and financial experts.

The African Development Bank (AfDB) has inaugurated the Debt Management Forum for Africa (DeMFA), a strategic platform aimed at addressing Africa’s escalating debt challenges. The forum was launched during a two-day event held on December 16-17, 2024, in Abuja, Nigeria, under the theme “Making Debt Work for Africa: Policies, Practices, and Options.”

The event convened key stakeholders including representatives from African Ministries of Finance, Central Banks, debt management offices, academics, and financial experts. The discussions focused on the continent’s rising debt levels, increasing borrowing costs, and declining credit ratings, and sought to identify policies and strategies to enhance debt sustainability and economic growth across Africa.

Significant Launch Highlighted by African Leaders

Nigeria’s Minister of Finance, Wale Edun, represented by Patience Oniha, Director General of the Debt Management Office, praised the initiative: “The introduction of DeMFA is very significant as it focuses on public debt management. I commend the African Development Bank for this laudable initiative. A forum dedicated specifically to Africa’s debt is a welcome development.”

Kevin Urama, AfDB Group Chief Economist and Vice President for Economic Governance and Knowledge Management, emphasized the forum’s strategic importance: “DeMFA represents another key milestone in the Bank’s efforts to build Africa’s capacities and provide institutional frameworks to address persistent debt sustainability challenges. Development is a do-it-yourself business.”

Three Pillars of DeMFA: Knowledge, Coordination, and Peer Learning

Eric Ogunleye, Director of the African Development Institute at AfDB, provided an overview of DeMFA’s roles:

1. Knowledge Platform: A hub for sharing research, data, and best practices in debt management.
2. Coordinating Platform: Facilitating collaboration among African governments, financial institutions, and international stakeholders.
3. Peer Learning Hub: Encouraging the exchange of experiences and lessons learned among African nations.

DeMFA aims to strengthen technical capacity for debt management, improve credit ratings for African countries, and alleviate debt distress across the continent.

Key Discussions and Insights

Panel sessions and presentations covered diverse topics including debt vulnerabilities, global debt architecture restructuring, debt transparency, loan negotiations, credit ratings, and the productive use of debt. Participants shared experiences on bolstering national debt management, emphasizing the importance of legislative reforms and comprehensive communication strategies.

Seth Terkper, former Ghanaian Minister of Finance, moderated the opening panel, advocating for holistic accounting practices that prioritize the management of debt arrears. “Governments should shift from a ‘primary balance’ framework to a more realistic ‘fiscal balance’ approach,” he stated.

Kenneth Rogoff, Harvard University Professor of Economics and former IMF Chief Economist, highlighted the benefits of borrowing in local currencies and under domestic jurisdictions to reduce borrowing costs and improve debt management flexibility.

Africa’s Debt Landscape and the Path Forward

In the past two decades, Africa’s fiscal deficits have surged from $0.8 billion to nearly $150 billion. The debt-to-GDP ratio has more than doubled from 33.6% in 2008 to 72.4% in 2021, before slightly declining to 64.8% in 2022. With global interest rates at their highest in 40 years, Africa’s debt service costs are projected to reach $163 billion in 2024, a sharp increase from $61 billion in 2010.

The launch of DeMFA is part of a broader initiative by the African Development Bank Group to enhance fiscal management across the continent. It complements existing frameworks such as the Strategy for Economic Governance in Africa (2021–2025), the Action Plan for the Management and Mitigation of Debt Distress Risks in Africa (2021–2023), and capacity-building initiatives like the Macroeconomic Policy Management Academy for Africa and the Public Finance Management Academy for Africa.

A Call for African Solutions

Speakers at the forum reiterated the importance of developing homegrown solutions to Africa’s debt challenges. “There is no alternative to sound public financial management in Africa,” stressed AfDB Vice President Urama. “We need to make Africa’s capital work for Africa’s development.”

DeMFA is poised to serve as a vital policy-level platform for African Ministers of Finance and Central Bank Governors, facilitating the implementation of existing strategies and action plans while supporting ongoing efforts to build resilient and sustainable fiscal systems across the continent.