Rising debt among African countries and its very negative impact on the provision of essential government services and infrastructure was a key element of President Cyril Ramaphosa’s opening address to the meeting of G20 Finance Ministers in Cape Town.
Ramaphosa said that South Africa had identified debt sustainability among developing countries as one of four key initiatives the country wishes to address during its first tenure as the Presidency of the G20. The G20 comprises 19 countries and the European Union, but the US has opted not to attend the meeting of Finance Ministers that started on Wednesday, due to the installation of the Trump administration.
Ramaphosa said that the debt of developing economies has risen sharply. For instance, the combined debt stock of low-income countries has doubled in the decade to 2022, and debt servicing costs are now crowding out the provision of essential services and infrastructure spending in many African countries.
Ramaphosa said he had met with several African leaders and former leaders who had formed the “African Leaders Debt Initiative,” which focuses on addressing the challenges that many African countries face regarding their national debt.
He emphasised that the G20 countries need to accelerate reform of multilateral development banks and strengthen capital flows to developing countries. The high cost of capital is one of the main factors inhibiting sustainable growth in developing economies.
While not specifically referring to the US, Ramaphosa remarked that some countries wish to go it alone, stating, “there is a collective responsibility for the G20 to advance effective stewardship of the global economy...in a rules-based economy.”
He asserted that multilateral cooperation “is our only hope of overcoming unprecedented challenges,” including slow and uneven economic growth, persistent poverty, rising debt, and the existential threat of climate change.
Ramaphosa highlighted that the G20 has historically played a key role in maintaining global financial stability. For instance, it engineered responsible responses to the global financial crisis in 2009 and played an important role in helping to maintain global financial stability during and after the Covid pandemic.
Another initiative that South Africa is promoting through its G20 Presidency is to strengthen disaster resilience and responses, as the world is now prone to disasters in both developed and developing economies.
He said for example that climate-change-related floods, which have never been seen before in many African countries, were striking hospitals, schools, and bridges. There are limited funds to rebuild without incurring additional debt for the country.
Another priority for the G20 during South Africa’s presidency is to mobilise further funding for a just energy transition, as many countries that have contributed the least to climate change, are now being forced to pay a disproportionate share of the energy transition.
The fourth priority during South Africa’s presidency is to ensure that developing countries can better harness their wealth of critical minerals, which are necessary for the energy transition and for global sustainable growth.
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