A new assessment of Africa’s position on reforms of the global financial infrastructure reveals slow progress in addressing the continent’s need for climate financing, debt concerns, and lack of transparency.
The African Future Policies Hub has released a report highlighting the key challenges and opportunities facing African nations in the global financial system and climate finance landscape.
“The assessment shows little to no progress is being made on addressing the continent’s debt concerns, high cost of borrowing, and actual disbursements against financial commitments and pledges−putting into question transparency and accountability frameworks in the financing ecosystem,” said Maria Nkhonjera, Senior Policy Lead (Public Finance), African Future Policies Hub.
The report, titled “Assessing Progress Towards Reforming the Global Financial Architecture: An African Perspective,” outlines the urgent need for reforms to address imbalances in the IMF quota system, increase climate finance flows to Africa, and enhance the effectiveness of multilateral development banks.
“As we head to COP29 where financing decisions will be taken, it is important to also take stock of progress on the reforms that are said to help us generate the trillions of funding needed to finance climate action in developing countries,” noted Faten Aggad at the African Future Policies Hub. “Despite positive developments, there is clearly significant work that is still needed especially reforms requested by African countries based on their realities.”
Here are key findings of the report:
Enhanced African Influence: The African Union’s admission to the G20 and the appointment of a third sub-Saharan African representative to the IMF executive board has strengthened African representation in global financial infrastructure reforms.
Unresolved Quota imbalances: The IMF’s quota system remains heavily skewed in favour of developed economies, with African nations holding a disproportionately small share.
Mixed Progress on Climate Finance: While advancements have been made in loss and damage mechanisms, commitments to adaptation finance and the delivery of climate finance commitments remain insufficient.
Multilateral Development Bank Reforms: MDB’s have initiated comprehensive reforms, but implementation has been uneven. A number of Africa’s priorities are yet to be operationalised, including the re-channeling of SDRs through the African Development Bank.
Capital Efficiency and Country Engagement: Progress in enhancing capital efficiency and transforming country engagement has been limited.
IDA Replenishment: African heads of state have called for a US$120 billion replenishment of the International Development Association, but major donors and World Bank management are only considering a US$105 billion benchmark.
G20 Common Framework for Debt Treatment: The G20 Common Framework remains unreformed, with limited progress in addressing high borrowing costs and lengthy debt resolution.
UN Tax Convention: Significant progress has been made towards establishing a legally binding UN tax convention, which could help address tax avoidance and evasion.
Global Climate Tax Standards and Trade Measures: There has been progress in advancing global climate taxes, but no progress on addressing unilateral climate-related trade measures.
Transparency in Climate Finance: Concerns remain over the transparency of “new and additional” climate finance, hindering effective climate action and resource allocation.
Debt-for-Climate and Nature Swaps: The use of debt-for-climate and nature swaps holds promise but has been limited in Africa.
New Collective Quantified Goal: African negotiators have called for the NCQG to be based on a needs-driven approach to address countries’ significant financial needs for climate adaptation and mitigation.
Official Development Assistance: The UN has set a target for developed countries to allocate 0.7% of their Gross National Income to ODA, but funding levels have been declining.
The report calls for continuous political pressure on global financial leaders and targeted advocacy efforts to drive progress in the reform of the international financial system.
“Reforming the global financial architecture means many things, but from an African perspective, especially responding to the UNFCCC process, it appears clear that progress remains critically insufficient until and unless we see significant new and additional international provision of grant-equivalent finance to developing countries, on the scale of the hundreds of billions required, respectively, to equitably address mitigation, adaptation, and loss and damage needs,” stated Iskander Erzini Vernoit, Imal Initiative for Climate and Development.
Upcoming negotiations offer a crucial opportunity for Africa to articulate its position and advocate for a system that truly supports its transformation and development goals.
Source: Kofi Adu Domfeh
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