Public debt ratios in sub-Saharan Africa are at their highest in more than two decades, the International Monetary Fund (IMF) said.
Governments on the continent, including Ethiopia, sought debt restructuring deals under an IMF programme to help them navigate the crisis, but conclusion of the process has been delayed.
Others, which have not sought to restructure their debt, like Kenya, have seen their debt sustainability indicators worsen after the pandemic hit their finances.
“African countries cannot… climb the development ladder with one hand tied behind their backs,” Guterres added.
Ethiopia’s Prime Minister Abiy Ahmed echoed the call. “Nearly all of us want to put our economies back on a growth trajectory but this will not happen without sufficient restructuring to make our external debt sustainable,” he said.
The summit, which brings together leaders from the 55 African nations, is also focusing on deepening food and security crises on the continent.
With many developing nations facing a triple whammy of rising debt loads, climate change and nature loss, conservationists say the answer could lie with a financial instrument enabling them to tackle all three at once: “debt-for-environment swaps”.
The world’s poorest countries owe US$62 billion in annual debt service, a year-on-year increase of 35 per cent, the World Bank said in December, warning of a rising risk of defaults.
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But even as debts burdens grow, there is now an urgent need for countries to invest more in climate and biodiversity protection to meet their international and national commitments.
In a bid to deal with these problems across the board, Portugal and Cape Verde sealed an agreement for a “debt-for-nature” swap last month, just days after Zambia said it too was looking at a similar proposal from green group WWF.
Former Portuguese colony Cape Verde, an island nation off West Africa threatened by sea level rise and coastal erosion, owes about 140 million euros (US$152 million) to Portugal and more than 400 million euros to banks and other entities.
The debt-for-nature swap negotiated with Portugal would see an initial 12 million euros of scheduled debt repayments put into an environmental and climate fund to help Cape Verde switch to cleaner energy supplies and tackle climate change.
Meanwhile, the debt-for-nature proposal for Zambia, which has vast national parks where some of Africa’s most impressive wild animals live or migrate, aims to channel US$750 million-US$1 billion into conservation projects.
In 2021, a US$553-million swap for Belize reduced its debt level by more than 10 per cent of GDP and provided funds to protect the world’s second-largest coral reef, while a 2015 deal with the Seychelles saw the government commit to protect 30 per cent of its waters in exchange for US$22 million of debt restructuring.
These types of debt swap are likely to increase in the coming years, analysts predict – with Ecuador and Sri Lanka also reportedly exploring similar deals.
Here are some facts about debt-for-environment swaps and the growing support for them among governments, conservationists and investors:
