This blog post was jointly written and published by think tanks participating in the Amplifying Africa's Voice Initiative (AAVI).
The Amplifying Africa's Voice Initiative (AAVI) was launched last year by ACET and FDL with two main objectives in mind. Firstly, to provide African policy institutes with a platform for discussion on the critical issues surrounding development finance in Africa. Secondly, to invite policymakers to share their insights and knowledge and generate new research from African institutions.
In December 2023, a meeting was held to review the research from the initiative at different stages, both already published and ongoing. The meeting allowed participants to share their findings, compare different countries and situations, and propose shared solutions for the future. This was a great opportunity for African policy institutes to share their diagnostics and propose solutions to challenges that are unique to their respective countries.
1. An Inclusive Framework for Loss and Damage
Beverly Musili, a former researcher with the Kenya Institute for Public Policy Research and Analysis (KIPPRA), presented her Report developed for FDL, which stemmed out of the second AAVI meeting, held after COP 27 in Egypt and the historical agreement on the Loss & Damage (L&D) Fund principle. The paper delves into the history of L&D, but also highlights its diverging interpretations. It also emphasises the challenges associated with non-economic losses, which are often borne by vulnerable populations.
Discussing the paper right after COP28 in Dubai, Beverly stressed the need for a just transition to sustainable energy sources, taking into account the historical exploitation of resources by developed nations. She also emphasised the need for financing that matches the pace of development expected from African countries and cautioned against excessive trust in technological solutions alone. The discussion then highlighted the importance of leverage research to ensure that negotiations around loss & damage go beyond just “writing checks”. The focus should also be on how the funds can be spent effectively, especially since grant money is limited.
Research, if well connected to regional processes such as the African Climate Summit in September 2023, could prove useful in shaping practical questions, determining the most effective use of funds and ensuring a fair and just transition to sustainable energy sources.
2. Getting back into debt
The case of Zambia
The second Paper presented at the December 13 AAVI meeting was a report jointly prepared by ZIPAR and FDL, which explained how Zambia fell back into debt and the lessons that could be learned from it by other developing nations. The report highlighted the policy choices made by Zambia during the 2010s, which, coupled with stricter lending terms, put the country on a fragile path. This eventually led to an inevitable default due to the COVID-19 pandemic.
During the discussions, participants raised further questions:
How to make debt more transparent in the future, not just in Zambia but also in other countries?
How can we make sure that those essential financial choices are accountable to parliament?
The next stage of the research will focus on the restructuring process and its aftermath.
The case of Kenya
The third presentation highlighted ongoing research, that will soon be published. The research sheds light on the situation in Kenya, where the pressure of debt service and climate change is increasing, especially in the agriculture sector in 2023. Daniel Omanyo, a Policy Analyst at KIPPRA, presented the research on escalating public debt trends, which have now reached 70% of the country's GDP. In addition to this, the rising cost of debt service is consuming a significant portion of Kenya's revenue, at 15.8%. To make things worse, Kenya faces a looming challenge in the form of a $2 billion Eurobond payment due in June 2024.
The discussion delved into some of the policy options available, such as how much official funding would be available in 2024, and the risks involved with exchange rate depreciation.
The discussant, Professor Babacar Sène, Professor at Université Cheikh Anta Diop (Senegal), emphasised the broader context of an upcoming wave of African sovereign Eurobonds. He explored alternative funding sources such as bond issuances in China for instance (as was the case in Egypt), using guarantees from MDBs, while at the same time improving debt management capacity.