African Nations See Limited Progress in Global Financial Reform Push
Looking ahead to COP29, where major financing decisions are expected, experts emphasize the urgent need for more substantial reforms.
JOHANNESBURG— African Future Policies Hub's latest assessment of global financial reforms reveals a mixed picture of progress, with African nations gaining some ground in representation but still facing significant hurdles in accessing climate finance and debt relief, writes Winston Mwale.
The report, released Tuesday, comes at a crucial time as African countries push for greater influence in shaping the international financial system while grappling with mounting climate challenges and debt burdens.
While the continent has scored some diplomatic wins – notably the African Union's recent admission to the G20 and increased representation at the International Monetary Fund (IMF) – substantial obstacles remain in transforming these gains into tangible financial benefits for African nations.
"The assessment shows little to no progress is being made on addressing the continent's debt concerns, high cost of borrowing, and actual disbursements against financial commitments and pledges," says Maria Nkhonjera, Senior Policy Lead at the African Future Policies Hub.
She highlights persistent questions about "transparency and accountability frameworks in the financing ecosystem."
The report identifies several critical areas where reform efforts have fallen short.
The IMF's quota system, which determines member countries' voting power and financial access, continues to favour developed economies disproportionately, leaving African nations with minimal influence despite their growing economic importance.
Climate finance remains a particular pain point. While there has been some progress in establishing loss and damage mechanisms, the delivery of climate finance commitments continues to fall short of African nations' needs. More concerning is the nature of the financing itself.
"Africa continues to benefit from international climate finance flows primarily in the form of loans, which are in many cases at market rate," explains Daouda Sembene of AfriCatalyst.
"This unsustainable trend needs to be promptly reversed, particularly in the case of adaptation finance."
The report also highlights tensions over the International Development Association (IDA) replenishment, a crucial funding source for Africa's poorest nations. African heads of state have called for a $120 billion replenishment, but major donors and World Bank management are only considering a $105 billion benchmark – a $15 billion shortfall that could impact development projects across the continent.
Debt relief mechanisms, particularly the G20 Common Framework, have shown limited effectiveness in addressing African nations' financial struggles.
The framework, designed to help countries restructure their debt, remains unchanged despite criticism over its lengthy resolution processes and failure to address high borrowing costs.
There are some bright spots.
The report notes progress towards establishing a legally binding UN tax convention, which could help African countries combat tax avoidance and evasion.
Additionally, innovative financing mechanisms like debt-for-climate and nature swaps show promise, though their implementation in Africa has been limited thus far.
Looking ahead to COP29, where major financing decisions are expected, experts emphasize the urgent need for more substantial reforms.
"Despite positive developments, there is significant work that is still needed especially reforms requested by African countries based on their realities," says Faten Aggad from the African Future Policies Hub.
The scale of required financing is substantial. Iskander Erzini Vernoit from the Imal Initiative for Climate and Development emphasizes that meaningful reform requires "significant new and additional international provision of grant-equivalent finance to developing countries, on the scale of the hundreds of billions required" for mitigation, adaptation, and loss and damage needs.
Adding to the challenges, official development assistance (ODA) levels have been declining, despite the UN's target for developed countries to allocate 0.7% of their Gross National Income to ODA.
This decline comes as African nations face increasing pressure to address climate change while maintaining development goals.
Multilateral Development Banks (MDBs) have initiated reforms, but implementation has been uneven.
A key priority for African nations – the re-channeling of Special Drawing Rights through the African Development Bank – remains unrealized, limiting the continent's access to additional financing options.
The report concludes by calling for sustained political pressure and targeted advocacy efforts to drive meaningful reform in the international financial system.
With several major international negotiations on the horizon, African nations have opportunities to push for changes that better reflect their development needs and climate challenges.
However, the assessment suggests that transforming diplomatic representation into concrete financial benefits will require continued persistence and unity among African nations.
As climate challenges mount and debt pressures grow, the need for substantial reform of the global financial architecture becomes increasingly urgent for the continent's future.