Poor nations are paying more on interest to creditors than they invest in their people, the South African president has said
South African President Cyril Ramaphosa has called for urgent and collective global action to address the growing debt burden that is crippling many developing countries, especially in Africa.
In his weekly letter to the nation, Ramaphosa highlighted the need for sustainable and affordable financing to achieve the United Nations Sustainable Development Goals (SDGs) by 2030.
Following the 4th Financing for Development Conference held in Sevilla, Spain, Ramaphosa said the world is facing “more daunting challenges than at any other time,” including the climate crisis, poverty, and economic instability.
He also highlighted the immense funding gap facing the world: “It is estimated that the world needs an extra $4 trillion a year to meet the UN Sustainable Development Goals by 2030, a gap which can only be closed through more affordable, long-term sustainable financing.”
He drew attention to the growing challenge posed by debt repayments, noting that: “Around 3.4 billion people now live in countries that are spending more on interest payments to creditors than on health and education.”
Quoting the Jubilee Commission appointed by the late Pope Francis, Ramaphosa said: ”While few countries have defaulted on their debt, they are defaulting on their people, their environment, and their future.”
He stressed that debt, when used wisely, can be a tool for development, but external shocks, such as the COVID-19 pandemic and global conflicts, have made it increasingly expensive.
“Debt can be a tool for development if it is affordable and spent efficiently on infrastructure and other investments that support growth. However, a succession of external shocks – including the COVID-19 pandemic, the destabilizing effect of various conflicts around the world, and tightening financing conditions – has caused the cost of debt to rise rapidly for many developing economies,” said Ramaphosa.
To address this, South Africa has taken concrete steps under its G20 Presidency, including the formation of an Africa Expert Panel led by former Finance Minister Trevor Manuel. The panel is tasked with developing actionable recommendations for debt sustainability.
”We have since been focusing on practical solutions to achieve debt sustainability, such as improving the G20 Common Framework for debt treatments to enable timely and adequate debt restructuring,” Ramaphosa said.
He also highlighted the importance of innovative financial mechanisms, including climate-resilient debt clauses that can automatically pause payments in times of environmental disaster.
Ramaphosa said the focus must be on ensuring timely intervention and adequate relief for countries facing liquidity challenges.
“There is no shortage of solutions to address the debt burden. What we need is the political will to translate proposals into action and to do so at a scale that matches the size of the challenge.”
The commitments made in Sevilla, to enhance fiscal space, address debt challenges, and lower capital costs, were echoed in the recent Rio de Janeiro Declaration adopted at the BRICS Leaders’ Summit, he said.
It called for a comprehensive and systematic approach to managing the debt vulnerabilities of both low and middle-income countries.
”The world cannot stand by and watch as rising debt service costs crowd out development for a generation or more,” Ramaphosa warned.
South Africa, he said, remains steadfast in its commitment to work with the international community to achieve a just, effective, and sustainable solution to the global debt crisis.
