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Summary

The 2024 flagship report of the United Nations Office of the Special Adviser on Africa (OSAA), "Unpacking Africa’s Debt: Towards a Lasting and Durable Solution," dispels myths about African debt and proposes sustainable solutions. Contrary to the belief that Africa suffers from a debt overhang, the report emphasizes the need for increased financing, including debt financing. 

Historically, Africa's debt has evolved from a pre-independence period, where debt-financed infrastructure for resource extraction for export to the metropole. Post-independence borrowing focused on health and education but failed to diversify economies, leading to unsustainable debt.

While some African countries are shifting towards domestic debt financing, which offers benefits, it also has risks like inflation and high interest rates. Against the backdrop of relatively slow growth, an inflationary environment, tightening financing conditions, and exchange rate volatility, the risk of unsustainable debt levels is high.

This new report argues that Africa’s debt problem is exacerbated by the asymmetric power relations inherent in the international financing and debt architecture, which favours creditors and imposes high costs on African countries. It calls for recognizing the need for fiscal space and reforms to enhance national and international financing structures while emphasizing the importance of affordable debt instruments, predictable debt sustainability, and prioritizing development outcomes over private finance interests.

It also highlights the need for domestic policy reforms, such as deepening domestic debt markets and engaging the private sector, to unlock capital and attract foreign investment. Strengthening regional financing architecture for development and improving debt management is crucial for supporting sustainable development and creating value chains beyond resource extraction.

The report recommends pragmatic policy actions and equitable global financing reforms to promote sustainable development, accelerating the achievement of the Sustainable Development Goals and the aspirations of the African Union's Agenda 2063.