African Nations Urged to Manage Domestic Debt Effectively

Effective domestic debt management is crucial for African countries, Jean-Paul Adam of the Office of the UN Special Adviser on Africa said.

Adam made the statement during a session – entitled: “Navigating the debt, development and environmental crises: the role of sustainable budgeting” – in Nairobi last week.

It is important for African countries to assess the potential future costs of interventions and their relative impact on effective debt management, Adam says. As such, key performance indicators (KPIs) must align with resilience efforts and remain simple and country-specific.

He further stated that budget labeling is crucial to track and identify gaps, and thus facilitate the mobilization of new financing. In addition, debt management strategies, such as debt refinancing, can help build resilience.

The exploitation of resources available through the African Development Bank (AfDB) can now allow countries to increase their resilience capacities, he added.

The AfDB has recently committed to dedicate 40% of its funds to climate finance and plans to increase this amount to 5-10 billion dollars between 2022 and 2025.

James Kinyangi of the African Development Bank noted with regret the large number of African countries currently facing the phenomenon of debt overhang.

An evidence-based approach and priority should be given to capacity-building tailored to the specific needs of each country. Fragile countries can lose up to 4% of their GDP due to crises, he said, underscoring the urgency of tackling this problem.