Calls to alter the current international system have been loud and clear, especially from the global south, and the organs under scrutiny have predominantly been the financial institutions and the Security Council.
Criticized for becoming their financiers’ weapon mainly, deliberate financial institutions are viewed as being unjust to borrowing countries.
The financial architecture of the world is as old as time and has been criticized by many parties as it has little or no room for those poor and developing nations to benefit and get fair service from the institutions. Countries in all continents, especially the African continent, call for the reforming of financial organs.
Global financial institutions have been widely seen as pawns of their financiers becoming biased towards developing nations and ill-treating borrowing nations. The injustice and unfair practices engulfing financial institutions have been forcing nations to find alternative means of finance. And the emergence of blocs like BRICS has already created options for nations to collaborate financially.
Developing countries like Ethiopia come under huge pressure to access finance as lenders come up with credits and loans with strings attached. And, joining the BRICS alliance brings lofty dividends not only to the nation but also to the bloc. Apart from striking a balance in the international system, the expansion of alternative international cooperation fosters trade.
Since the world changed its currency from gold reserves to US dollars, the financial structure of the globe has turned its face to another direction where debt is the key financial system.
Even major economic powerhouses of the world use debt to lead their states. Countries like the United States of America even have billions of debt. However, the essence of debt for those economic superpowers is completely different from those poor and developing nations.
Last April, African ministers and senior officials at the tenth session of the Africa Regional Forum on Sustainable Development (ARFSD-10) called for timely reform of the global financial institutions and architecture for sustainable development and financing for development in Africa.
This according to the ministers will be the unified African message to the Summit of the Future to be held in September 2024 in New York. The message, which comprises commitments aligned with Africa’s priorities, is to be delivered as part of the planned pact of the future to be delivered at the Summit.
In their declaration on the effective delivery of sustainable, resilient and innovative solutions to reinforce the 2030 Agenda and Agenda 2063 and to eradicate poverty in times of multiple crises released at the closing of ARFSD-10 in Addis Ababa, the ministers called upon the participants at the Summit of the Future to consider and adopt, as part of the planned pact of the future, the reforms for sustainable development and financing for development in Africa.
“The summit should ensure the timely reform of the global financial institutions and architecture to make them fit for purpose and able to serve the interests of Africa and developing countries elsewhere in the world,” reads the declaration.
The declaration was agreed against the backdrop of the serious challenges being faced by African countries, including threats to inclusive, sustainable and resilient growth posed by conflict and instability, inadequate sustainable financing, debt stress, illicit financial flows, profit shifting, climate change, the loss of biodiversity, land degradation and pollution and human rights violations.
The declaration calls for the need to ensure the existence of global financing mechanisms that give African and other developing countries access to adequate and equitable concessional financing and to affordable market-based resources to accelerate sustainable development. In addition, there is a need to reform international tax governance.
Delivering her closing remarks at the ARFSD-10, Hanan Morsy, Deputy Executive Secretary and Chief Economist of the Economic Commission for Africa, said Africa has an opportunity to reverse trends and accelerate action towards realizing the SDGs and the Africa We Want by ensuring access to basic social services, generating job creation, and putting in place social protection and safety nets to reduce vulnerabilities and inequalities.
She stressed that Africa cannot achieve the SDGs and Agenda 2063 without finances. The ministers expressed their concern at the serious challenges that African countries face in accessing climate finance and at the high cost that they pay to mobilize capital from the private sector for investment, despite the multiplicity of climate-related funds to finance climate projects in emerging economies and developing countries by 2030 to achieve the SDGs by 2030.
In what could be seen as a positive move, the emergence of BRICS and other organizations is enabling countries to explore new funding options.
Blocs like BRICS might act as alternative sources of funding due to their large portion of the worldwide population and the global economy. Recently, Ethiopia’s application for membership in the New Development Bank (NDB) has received backing from the founding countries of the BRICS economic group.
On the occasion, BRICS Foreign Ministers included Ethiopia’s perspectives, advocating for seamless integration of Ethiopia and other new members into BRICS and the New Development Bank.
The Foreign Minister of Ethiopia, Taye Atske Selassie, headed a high-level team that attended the BRICS Foreign Ministers’ Forum.
MoFA Spokesperson Nebiyu Tedla (Amb.) told journalists that the founding members of BRICS, including Russia, China, and Brazil, have committed to supporting Ethiopia’s bid for NDB membership.
“BRICS members will support Ethiopia’s and other new entrant’s aspiration to join the New Development Bank, as stated during the joint announcement following the summit’s conclusion.”
He also highlighted that the joint announcement directed Ethiopia and other new BRICS member states to receive support to join the NDB based on their financial capabilities.
Foreign Minister Taye reportedly emphasized Ethiopia’s aspiration within the BRICS framework during the summit. “The ongoing geopolitical tensions among superpowers are affecting developing countries. Ethiopia believes in the need for a genuine global partnership. In this regard, the Foreign Minister urged BRICS members to craft constructive mechanisms to navigate these geopolitical challenges,” Nebiyu elaborated.
Speaking of debt, Africa is experiencing the hardest time doing things with its finances. The continent indeed gets much of its finance from various donors including international financial institutions. Though such funds have the potential to fill some gaps for those nations, they also backfire their negative consequences on those borrowers.
Similarly, Taye Atske Selassie discussed with the Executive Secretary of the UN Economic Commission for Africa (ECA), Claver Gatete on strategic areas of importance.
Their discussion focused on strengthening collaboration between Ethiopia and ECA in strategic areas of importance defined by Prime Minister Abiy Ahmed, such as innovation, statistical data, social development and macroeconomic development.
On the occasion, Claver Gatete noted that ahead of the opening of ‘Africa Hall in October 2024, the government of Ethiopia and ECA will collaborate on marketing and linking this iconic masterpiece to other strategic sites of historical, research and touristic importance – Africa Hall -An iconic spot to tell Africa’s story.
With Ethiopia’s leadership in the Financing for Development (FFD) agenda, the two dignitaries agreed on the importance of Africa’s finance ministers in the FFD2025 preparations for meaningful financial traction and voice, ahead of the Summit of the Future, to be held in September 2024 under an overarching theme “Multilateral Solutions for a Better Tomorrow”.
Their discussion also stressed the imperative for Africa’s strong voice to be heard on Global Financial Architecture (GFA) reform.
The ECA Executive Secretary noted that high indebtedness is a bombshell on development, Sustainable Development Goals (SDGs) and AU Agenda 2063 and the global economy. Concessional lending is not enough.
Gatete posted on X that: “Credit rating is impacting on affordable financing and investment grading.” Failure to reform the GFA is not an option, the executive secretary underscored.
BY DANIEL ALEMAYEHU
THE ETHIOPIAN HERALD WEDNESDAY 26 JUNE 2024
