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The African Economic Research Consortium (AERC) in collaboration with Boston University Global Development Policy Center, Vulnerable Group of Twenty (V20) Ministers of Finance of the Climate Vulnerable Forum (CVF) and Debt Relief for a Green and Inclusive Recovery (DRGR ) Project hosted a side event on September 5 at the Africa Climate Summit that took place in Nairobi on September  4 – 8 2023.  The Event organized under the Summit thematic pillar ‘Adaptation and Resilience to Climate Risk’, addressed issues around the Emergency Coalition for Debt Sustainability and Climate Prosperity, and the alternative frameworks and solutions that can be offered to reform the debt architecture.

The side event that was moderated by Dr. Sara Jane Ahmed, (Finance Advisor to the Vulnerable Group of Twenty (V20) Ministers of Finance of the Climate Vulnerable Forum (CVF)), featured High level speakers among them Prof. Abebe Shimeles (African Economic Research Consortium and University of Cape Town), Prof. Kevin Gallagher (Director of the Boston University Global Development Policy Center and professor at the Pardee School of Global Studies and co-chair of the Debt Relief for a Green and Inclusive Recovery project), and Dr. Brian O’ Callaghan, (Senior Advisor, United Nations Economic Commission for Africa).

Prof.  Abebe Shimeles presented findings from the ongoing collaborative research project on “Evidence to drive reforms for Special Drawing Rights (SDR) financing in SSA economic recovery” funded by the Bill and Melinda Gates Foundation (BMGF). The project focuses on countries that have high potential to use SDR allocations for development but currently face serious debt issues which include Ghana, Ethiopia, Senegal, and Kenya. Prof. Abebe’s paper on Triple Shocks, Debt Distress and Liquidity Crunch in Africa: Reforming the architectures of Development Finance discussedhow climate change induced shocks erode economic fundamentals if urgent action isn’t taken. He observed that most countries have depleted foreign reserves, that have led to exchange rate instabilities, inflation, and rise of informal markets for foreign currencies. He further noted that some African countries have allocated significant share of their holdings for managing balance of payments challenges in the face of painful debt service burdens and hence reallocating and utilizing idle SDR holdings make important economic sense for the globe.

Prof. Kevin P. Gallagher on the other hand presented a paper on Africa’s Inconvenient Truth; Debt Distress and Climate-Resilient Development in Sub-Saharan Africa and noted that there is an urgent need for climate action in order to address external shocks through increased liquidity, expanding development finance and debt relief among developing countries. While commenting on the presentations, Dr. Brian observed that African countries need to strengthen their domestic resource mobilization to manage their debt.

 

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