A reformed global financial architecture must fairly represent and respond to the needs of Africa - ECA's Gatete

Addis Ababa, Ethiopia 18 November 2024 (ECA) - Stakeholders and government representatives attending the consultations for the Fourth International Conference on Financing for Development in Africa in Addis Ababa, Ethiopia have called for an overhaul of the global financial architecture, stressing the need to reform it into one that fairly represents and responds to the needs of Africa.

The two-day conference organized by the Macroeconomics, Finance & Governance Division of the Economic Commission for Africa (ECA) is examining Africa's financing needs and developing a concerted approach towards FfD4 in Seville, Spain in June 2025.

In his address, Claver Gatete, Executive Secretary, ECA highlighted the need for a unified response to challenges posed by the COVID-19 pandemic, geological tensions and economic downturn which have stretched the continent to the limit.

"Africa now faces a financing gap of up to $1.3 trillion annually to meet its sustainable development goals by 2030," he said.

"As of 2023, the continent's external debt exceeded USD 1 trillion with extremely high annual interest payments - in effect, limiting our ability to fund essential development."

To chart a new path forward, Mr. Gatete proposed actionable steps to guide countries, stressing the need for financial systems that prioritize the SDGs, Agenda2063 and climate action, while leveraging concessional finance and robust domestic resource mobilization.

These include broadening the tax base, strengthening tax compliance and digitalising systems to be more efficient and effective; reviewing and targeting tax incentives to ensure companies deliver genuine benefits to communities, jobs and economies; and combatting revenue leakages, illicit financial flows and tax evasion in digital and crypto assets to retain the capital needed for Africa's development.

Furthermore, stressed Mr Gatete, "It is essential for Africa to have immediate relief on debt service."

"Revising the G20 Common Framework to include fast-tracked restructuring procedures will go a long way to enable African countries to manage debt sustainably. Additionally, extending the Debt Service Suspension Initiative will offer breathing space for economies in distress," he added.

Semereta Sewasew, State Minister of Finance, Ethiopia urged countries to engage fully at the Fourth International Conference for Development to define Africa's approach and secure critical development financing.

She said African countries should implement strategies for sustainable debt management and elevate the debt burden to free up resources for social services and development.

"Many African nations allocate substantial revenue to debt servicing rather than crucial sectors like education and health care. There is need to have a coordinated approach involving both public and private sectors can aggregate burdens and enable more productive resource allocation," she said.

Traditional financing alone, she stressed, is insufficient to meet these challenges, necessitating innovative mechanisms like debt for climate swaps, carbon trading and climate bonds.

"Enhancing domestic resource mobilization capacity is crucial for meeting Africa's development needs and reducing reliance on aid," she said,highlighting modernizing tax systems, improving collection and expanding formal economies as essential strategies for mobilizing domestic resources.

Mr. Albert Muchanga the Commissioner for Trade and Industry at the African Union Commission, stressed the need for independent tax bases on the continent; and collaborating with international organizations, as well as leveraging international tax cooperation to mobilize financial resources effectively for the continent.

He pointed out the need for a robust, transparent and inclusive global finance architecture to support poverty alleviation programs and emphasized the importance of collaboration between the AU and ECA to improve foreign policy and operational efficiency and pointed out the importance of statistics and data in achieving financial goals.

For his part, Li Junhua, Under-Secretary-General for the Economic and Social Affairs Department of Economic and Social Affairs (DESA), emphasized the need to reform the international financial architecture to support sustainable development. He highlighted the widening financial gap and the debt burdens faced by African countries which hinder investment in SDGs and climate action.

"The urgency of the moment requires concrete actions with a focus on increasing fiscal space for SDGs investments and a multilateral system that supports national efforts," said Mr. Junhua.

"I encourage active engagement from stakeholders to ensure no one is left behind in the pursuit of sustainable development," he added.

For his part, H.E. Chola Milambo, co-facilitator of the Preparatory Committee for the FfD4, stressed the importance of engaging strategically as Africans in the negotiation process at the 2025 FfD4 and said taking advantage of existing relations and cooperation was important. For instance, "African institutions and experts from different sectors should be involved in providing technical support and influencing proposals."

He stressed the need for Africa's ministers of finance to be involved in the FfD4 negotiation process, to address closing the financing gaps, climate financing and domestic resource mobilization.

About FfD4

The Fourth International High-Level Conference on Financing for Development will be held in Seville, Spain in June 2025. It will discuss progress made in the implementation of the Monterrey Consensus of the International Conference on Financing for Development, the Doha Declaration on Financing for Development and the Addis Ababa Action Agenda, and identify obstacles and constraints encountered in the achievement of the goals and objectives agreed therein. It will also shape the agenda on financing for sustainable development issues for the next decade.

Issued by:
Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Ethiopia
Tel: +251 11 551 5826
E-mail: [email protected]

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