54 Scenes
- “The loan is a deferred tax, because at some point in the future, the Government will use taxes to increase their income to repay this debt.”
PH: DR; Jason BRAGAZA, AFrodAD Executive Director
« Why do we need to reform the global economic architecture? Why is this important in the context of public debt? What attitudes should African countries adopt to better reform the global economic system? What opportunities are available to people at global, continental and national levels? And Why do we need to reform the global economic architecture? » So many concerns that justify the organization of a press conference by AFrodAD (Africa Forum for Debt and Development) on August 5, 2024 by video conference. In his delivery, AFrodAD’s Executive Director, Jason Braganza, explained the reasons behind the urgent need to reform the global financial and economic architecture and provided deep thoughts and insights on the future of debt.
Alan ASANKPON
To illustrate his speech on the reform of the economic architecture of global debt, Jason Braganza tried to contextualize his development on African debt by naming four countries that defaulted on their debt; these include Zambia, Ghana, Ethiopia and Chad. “There are several others not too far from a basic edge”including Kenya (the country of origin).
“We have seen a number of public protests that have taken hold across the continent. Again, in Kenya, Uganda, Nigeria, Ghana, and more widely, in developing countries, Argentina, Bangladesh, Sri Lanka, etc. “
When considering this perspective, the following question should be asked: What motivates people to take to the streets and demand change, more accountability and transparency from their leaders?
“This is because the ecosystem in which our countries operate does not serve the interests of citizens, but rather multinational companies that seem to be able to send billions of dollars out of the continent every year, without accountability, as they continue to worsen debt, inequality, poverty, lack of public services, etc. » explained Mr. Braganza.
Foreign direct investment, fertile ground for debt
Three points justify the context of debt: trade deficits, balance of payments deficits, illegal financial flows and state tax regulations that add to the national level to create a budget gap or a wider tax gap. “This creates fertile ground for governments to borrow to fill these gaps. So our inability to trade high value products or move up the value and supply chain in terms of manufacturing and business, means a gap that we need to fill by attracting direct investment from abroad.”
The speaker emphasized that African countries have not been able to raise domestic tax revenue, which forces them to offer tax incentives to attract foreign direct investment. “Certainly, it creates a fertile ground for us to borrow. “
Of course, borrowing is not bad in itself; what is important is the use made of the loan, it is the reflection made by the majority of citizens. Jason Braganza opposes this idea, according to him, in the current context, the loan that many African countries are doing is very bad, because much of it is used to run government operations rather than investing in development.
“A large part of the loan is used to repay existing debts. This creates a vicious cycle of reliance on borrowing to run the government and repay debt, rather than investing in development and people. This puts us in a very difficult position. “
To add to these views, the co-hosts of the press conference, Chennai and Jane, raised a question about the support given by the IMF (International Monetary Fund) to governance structures on the way in which international debt is manage and be managed.
The IMF, the guarantor of an insurance policy for creditors, is responsible for ensuring macroeconomic stability by providing credit lines to developing countries so that they can continue to access international capital markets. to obtain commercial debt to finance government operations.
Debts, a vicious cycle: restructure them or reprogram them?
Debt seems to be a vicious circle and therefore it is urgent to restructure or reprogram it, and thus the question of reforming the global financial and economic architecture.
What should we change? “I think the biggest thing is that we cannot separate debt from the whole range of development finance instruments. Debt has to work together. Debts must be targeted. You have to have the right kind of instrument and finance the right kinds of projects. Currently, there is a disconnect or misalignment between the types of debt instruments our governments use to finance long-term projects. Some of these instruments are very short-term, so even before the projects are completed, in terms of construction, the debt is already due. explained Mr. Braganza.
For a better reformed global economic system
An economic architecture that is fairer, more fair and that deals with the issue of debt from the point of view of the borrower and not necessarily from the point of view of the borrower. This is about how we can ensure that borrowing countries, and especially African governments, have a unique and powerful voice at the negotiating table. Because debt, just like taxes, just like trade, is a set of compromises.
“You want to get a loan, you negotiate the type and terms of the contract. If you have trouble paying, you negotiate restructuring, rescheduling, etc. So we need a level playing field, a transparent playing field where workers can sit down with their employer and negotiate a contract. Currently this is not happening. We have a system that is very much for the coordination of creditors. This is the general framework I am referring to, but it does not allow lenders to come together, to negotiate as a whole, as a team, in a systematic and coordinated way.”
AFrodAD Executive Director Jason Braganza explains the basics of restructuring here: « What is very fundamental here and why we want a proposal and a process under the auspices of the United Nations is that this is still the place where developing countries, especially those in Africa, can do a lot to exercise power and influence without the necessity. the current pressure on them when negotiating in other areas, especially through the Common Framework, especially through the G20, the IMF, etc. “This is a question of jurisdiction” he sends.
Indeed, debt burdens undermine the sovereignty of our countries and our citizens. Therefore, it is appropriate to study the debt architecture in a positive way so that it can strengthen the voice of African countries and citizens at the negotiating table.
Therefore he invites Governments not to shy away from the complexity of the debt that we see at a national level. “We should not shy away from these problems; there are questions about transparency, accountability and governance around how debt is used.”
By doing so, African leaders and citizens will find a world system that is fairer and more just at the country level. At the national level, we can have strong systems that do not compromise sovereignty and citizens’ rights when countries decide to take on debt.
“The Loan is a deferred tax, because at some point in the future, the government will use taxes to increase its revenue to repay this debt.” To this end, he invites journalists (the media) to understand these dimensions; how debt mechanisms work at the national level; the roles of various ministries, departments and agencies within the state’s regulatory system when lending.
The legislature also has a role to play as much as the media through the texts of laws, a place of justice that is very important. It is important that the media ensure that the Government and the government bureaucracy are held accountable when governments borrow.
This interconnection between the national, the continental and the global is still very important if there is to be a coherent situation.
Some suggestions
Under the auspices of the United Nations, where developing countries, developed countries and creditors can all sit at the table as equals and negotiate more fairly and more clearly, giving the borrower the benefit of the doubt so that she cannot to achieve its developmental goals only. , but also meeting its debt repayment obligations.
At the continental level, African finance ministers, after realizing that some processes are not working, have long called for a review of the existing debt reduction and restructuring processes. This is the case of Zambia, Ghana, Ethiopia; These countries now want to negotiate their restructuring programs within the general framework.
