A study conducted by the ONE Campaign has unveiled that 36 African nations are expected to pay a total of $56 billion in interest on loans acquired from capital sources between 2017 and 2021.
This research report points out that this amounts to a very high 500 percent interest rate if these loans were from the World Bank.
Nigeria, grappling with substantial domestic and external debts totaling around N77 trillion, has seen a significant portion of its government revenue allocated to debt servicing.
The report blamed the huge interest rate on the combination of rising interest rates and lack of sufficient affordable capital from the World Bank which is increasing economic pressures on vulnerable countries already at high risk of debt distress.
It stated that borrowing from capital markets is costing 36 low-income countries already at high risk of debt distress.
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“This affordable capital crisis means that a growing number of low- and low-middle income countries will be unable to turn crisis hit economies around, invest in vital services such as health and education, or respond to the climate crisis,” the report said.
It quoted the Chief Executive of the ONE Campaign, Gayle Smith, that the situation made neither political nor economic sense that low- and low-middle income countries were being forced to pay premium prices for capital at the very moment they were trying to recover from the pandemic, deal with the fallout from Russia’s invasion of Ukraine, and respond to the growing threat from climate change.
“It’s even more stunning to consider that solutions are at hand, if the world’s wealthy and most powerful countries choose to pursue them – solutions that would enable developing economies to recover and grow and would also deliver big-time to a global green energy future,” it added.
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Smith called on the leaders of G20 to implement the recommendations of their own independent experts group to accelerate efforts to reform the World Bank and triple the volume of affordable investment available to low- and low-middle income countries.
He said, “The G20 says of itself that it is the premier forum for international economic cooperation. It plays an important role in shaping and strengthening global architecture and governance on all major international economic issues.’ That’s a pretty bold mandate. It’s time for G20 leaders to step up and lead, and shape the global architecture and governance on the major issues of the day to serve, indeed, the entire globe.”
Daily Trust