Caritas Africa Calls on Global Finance Leaders to Address Debt Crisis ahead of G20 Summit

They also quote Pope Francis who said last year that “Relieving the burden of debt of so many countries and communities today, is a profoundly human gesture that can help people to develop, to have access to vaccines, health, education and jobs.”

The officials of the Catholic development entity find it regrettable that two years after its launch, the G20 debt relief initiative – the “Common Framework for Debt Treatments Beyond the Debt Service Suspension Initiative” – has yet to deliver debt reductions for any applicant.

According to the Caritas officials, the initiative’s “uncertainty, functioning and timeframes” make borrower countries hesitant to even approach it.

The G20 or Group of Twenty is an intergovernmental forum comprising 19 countries and the European Union (EU). The members of the G20 are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the EU.

The entity was formed in 1999 with the aim of discussing policies in order to achieve international financial stability. According to the information provided on the G20 website, the forum was formed as an effort to find a solution to the global economic conditions hit by the global financial crisis in 1997-1999 by involving middle-income countries and having systemic economic influence, including Indonesia.

On the advice of the G7 Finance Ministers, the G20 Finance Ministers and Central Bank Governors began holding meetings to discuss the response to the global financial crisis that occurred.

This year’s G20 Summit to be held in Bali is set to begin on November 15 and conclude the following day, November 16.

In their statement, the officials of Caritas Africa call on the G7, in particular, to spearhead the establishment of processes that bring together public and private creditors for timely, speedy and orderly debt crises resolution.

The G7 is an inter-governmental political forum consisting of the world’s largest IMF advanced economies and liberal democracies. The seven global economic powers include Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. 

It is a formal, high-profile venue for discussing and coordinating solutions to major global issues, especially in the areas of trade, security, economics, and climate change. G7 has spearheaded several major global initiatives, including efforts to combat the HIV/AIDS pandemic, provide financial aid to developing countries, and address climate change through the 2015 Paris Agreement.

In their statement, Caritas Africa officials appeal to the G7 to grant borrowers “a stay on debt payments” while they reach agreement with all creditors.

Additionally, debt relief assessments should be reformed to enshrine the principle that human development and climate investments come before debt payments, they say.  

“G7 countries, as key debt governing jurisdictions, should pass domestic legislations that prevent private creditor litigation from undermining international debt relief efforts,” Caritas Africa officials say.

They appeal to the global finance leaders to support African countries experiencing an economic crisis owing to the COVID-19 pandemic, which they say has reversed the gains made in the fight against poverty on the continent.

“We, Faith Leaders from Africa, write to you the Group of 7 and African Finance Leaders as our Continent tries to cope with an unprecedented confluence of crises,” Caritas Africa officials say, and add, “A fallout from the pandemic led to economic contraction of more than 3 percent and reversed years of development progress.”

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“After two decades of poverty reduction, more than 40 million Africans have fallen into extreme poverty since 2020,” they further say.

According to the officials of the entity that is one of the seven regions of Caritas Internationalis, global economic trends promise further upheaval. Caritas Africa officials say, “Less than three years after the biggest global recession in a century, the threat of recession looms again.”

They note that the shock of the Russia-Ukraine war, worsening drought in the Horn of Africa, and the concerted interest rate hikes in the major economies threaten to derail the African continent’s “fragile” recovery.

“Budget shortfalls and unpayable debts have reduced the room our countries have to take the needed actions to protect the most vulnerable and restore prosperity,” Caritas Africa officials lament.

In addition to their call on global economic leaders to address the debt crises, the officials of Caritas Africa propose the extension of Special Drawing Rights (SDRs) to cover other areas of difficulty, including tackling the hunger crisis in various parts of Africa.

“The creation of $650 billion in SDRs for coronavirus response and recovery has enhanced stability and supported funding for vaccines, health and social protection, and economic stimulus programs in many African countries,” they say, adding, “We believe SDRs have a much more significant role to play in supporting health, education, food and social investments, climate adaptation and the achievement of the Sustainable Development Goals.”

“We note with regret that, in spite of pledges made by rich countries to re-channel USD 100 billion of their SDRs, this promise remain unfulfilled to date,” Caritas Africa officials say.

They add, “We join other voices in calling on rich countries to re-channel a significant portion of their stock of more than $400 billion in Special Drawing Rights to African countries.”

They also underline the need to prevent future debt crises, saying, “While bringing debts down is critical and urgent, policies need to lay out the foundations for a lasting exit from debt crises.”

According to the Caritas officials, preventing future debt crises requires the adoption of responsible lending and borrowing rules and standards, including debt contract disclosure and authorization frameworks.

They say both creditor and borrower countries have a responsibility in supporting compliance with such standards through their own laws and policies.

“Borrowers should not continue to shoulder alone the weight of external shocks, which are increasingly frequent and put their poorest at risk. Debt contracts should include clauses that fairly allocate the risks of natural disasters and other shocks between creditors and debtors,” Caritas Africa officials say in their statement shared with ACI Africa on October 6.