WASHINGTON– The ONE Campaign released the following statement today in response to remarks made by US Treasury Secretary Janet Yellen during a visit to Dakar, Senegal, the first stop on her two-week, three-country trip to Africa.
“Africa will shape the future of the global economy, and the US must nurture a long-term partnership that addresses challenges and taps into the vast economic opportunities,” said Tom Hart, president of The ONE Campaign. “As part of that, the US must be laser-focused on leading solutions to address the debt crisis affecting many countries in Africa. Not only does it have drastic impacts on economies’ ability to grow, the human cost is significant. More money spent on debt servicing means less spent on health, education, and other services. If not immediately addressed, another 20 million people will be at risk of falling into extreme poverty.”
Secretary Yellen’s trip, the first cabinet-level visit since the US-Africa Leaders Summit in December, comes as many African countries teeter on the edge of an economic crisis. By all accounts – and for all economies – 2023 is not shaping up to provide much-needed relief. Inflation, food insecurity, and climate shocks continue to put pressure on economies and public finances, many of which are already struggling under the stunning weight of debt.
22 African countries are now either bankrupt or at high risk of debt distress, and African debt remains at its highest level in over a decade. With debt service consuming increasingly large proportions of budgets and revenues, a wave of defaults in the world’s most vulnerable countries could occur even faster than expected. Beyond responding to the debt crisis – an urgent priority – countries will need injections of new money and investment to help drive response and recovery.
Take a look at Zambia, where Secretary Yellen heads on Saturday.
- Zambia opted out of a $42.5 million eurobond repayment in 2020, becoming the first African country to default in the pandemic era. Zambia applied for relief through the Common Debt Framework, an initiative launched in the name of swift debt reworking that has yet been slow to provide relief. Zambia, one of just three African countries to utilize the Common Framework, has yet to come to an agreement.
- According to ONE’s Data Dive on the Zambian economy, the country paid an estimated US$2,945.7 million in debt service in 2022– about 34.4% of government spending.
ONE has asked the Biden administration to support reforms that would provide flexibility to financial institutions that play a key role in cushioning the blow of a debt crisis and leveraging funds for economic growth, education, health, and other needs. Those reforms include:
- Unblocking the Common Framework to incentivize countries to apply for debt relief, make the process for applying for debt relief more transparent, and bring private creditors to the table to make progress on debt relief.
- Modernizing multilateral development banks, like the World Bank, so that they are more efficient with the resources they have and can leverage up to $1 trillion in new lending without putting their triple-A credit rating at risk.