Dear Reader,
A growing number of influential voices, such as Indermit Gill, Chief Economist at the World Bank, and Cyril Ramaphosa, President of South Africa are signaling a significant shift in the global discourse on debt. The focus is moving away from short-term liquidity fixes towards a growing recognition that comprehensive debt relief is essential for sustainable development and climate action.
The pressing reality, laid bare in the World Bank’s latest “International Debt Report”, is that comprehensive debt relief is imperative for a large number of highly indebted nations. Gill does not mince words in the report's foreword: The financing system is broken, he says, because “multilateral institutions and sovereign creditors bear almost all the risk, while private creditors reap almost all the rewards”.
Gill’s recognition of this urgency is shared by an increasing number of influential voices from Africa, with this call for comprehensive debt relief gaining momentum. Cyril Ramaphosa, President of South Africa, has made “debt sustainability for low-income countries” one of three priorities in his country’s G20 presidency launch. He pointed out that an unsustainable level of debt hampers inclusive growth by limiting investments in infrastructure, healthcare, education and other development needs. Under his leadership he wants the G20 to “advance sustainable solutions to address high structural deficits and liquidity challenges, while extending debt relief to developing economies.”
Adding urgency to the discussion, former Nigerian Vice President Yemi Osinbajo highlighted the stark consequences of inaction in a Financial Times op-ed, arguing that the current debt treatment mechanism, the G20 Common Framework, is not fit for purpose as it fails to provide a predictable pathway to comprehensive debt relief.
Nigerian President Bola Ahmed Tinubu echoes these sentiments, comparing superficial liquidity injections to “pedaling harder on a bicycle as its tires go flat” in a Politico op-ed. As Tinubu emphasizes, nearly half of Africa's countries are either already in debt distress or teetering on the brink and the funds needed to combat the climate crisis are in direct conflict with servicing mounting debt obligations. Tinubu argues that the cost of not addressing Africa's debt crisis is far greater than the immediate debt relief that is required.
Mark Sobel, the U.S. Chair of the Official Monetary and Financial Institutions Forum (OMFIF) and a veteran former U.S. Treasury official with two decades of experience in international financial diplomacy reinforces this point in an Op-Ed co-authored with Kevin Gallagher. They warn that "extend-and-pretend refinancings" deepen hardships for the poorest and sow “the seeds for massive debt relief in the future”, challenging the IMF focus on liquidity as the solution.
This growing momentum toward a holistic approach to the debt crisis isn’t just a fleeting discussion—it’s a potential turning point in global financial reform, that should be seized in 2025. Dive into the full blog to explore the solutions that are emerging from voices such as Tinubu, Rampahosa, and Sobel.
Wishing you peaceful holidays and a successful start to 2025,
The Debt Relief for a Green and Inclusive Recovery Team |