Mozambique: Growth of Africa debt having ‘catastrophic effect’ – deputy minister

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Mozambique: Growth of Africa debt having ‘catastrophic effect’ – deputy minister

5:36 CAT | 14 Oct 2023

FILE - For illustration purposes only. [File photo: Ministério da Economia e Finanças de Moçambique]

Mozambique’s deputy minister of economy and finance said on Thursday that the growth of African countries’ indebtedness is having “a catastrophic effect” and argued that the continent should have three members on the board of the International Monetary Fund to ensure that it is better represented.

“In addition to the rise in interest rates, which makes financing for African countries more expensive, the conflict in Ukraine is a shock with adverse consequences for African countries because they are importers of fossil fuels and cereals and have to absorb this shock in a context where there is not enough margin to cushion them and in a situation of vulnerabilities associated with debt servicing, which are having a catastrophic effect,” said the deputy minister, Amílcar Tivane.

Speaking to Lusa on the sidelines of the annual meetings of the IMF and the World Bank, which are taking place in Marrakech this week, he emphasised that the growth of debt in this context “absorbs a significant amount of fiscal space” and that this has knock-on effects on their capacity to grow and adapta their economies.

“Countries are not having the capacity to create fiscal cushions to cushion this shock further and meet development expenses,” he said, stressing that it is therefore necessary to “rethink the international financial architecture in a creative way, with innovative mechanisms” that include freeing up more IMF Special Drawing Rights – supplementary foreign exchange reserve assets maintained by the IMF – for developing countries, particularly ones in Africa, investing in green finance, and working to improve the macroeconomic scenario in order to attract capital on the international markets.

Asked how the process was going of increasing the number of African members on the IMF’s board from the current two to three, to give Africa more say and decision-making power, Tivane said that “a ministerial committee on the constituencies of the IMF’s African group will be set up to come up with solutions on how to divide the countries into three constituencies, in other words, creating another one for sub-Saharan Africa.”

Source: Lusa