African countries to pay US$56bn more on debt raised on capital markets — Research
Research by ONE has revealed that African countries will pay $56 billion more on debt raised on capital markets between 2017 and 2021.
The research also stated that “If average interest rates on bonds increase by 1% more, interest would cost an additional US$2.5 billion for African countries and US$27 billion for middle-income countries from debt taken in 2021 alone.”
According to ONE, “African countries will pay US$13.8 billion in interest over the lifetime of 2021 bonds (that is just one year’s worth of new debt). If they had borrowed at the rates they borrow from the World Bank, they would have to pay US$2.7 billion instead. That means US$11 billion in additional interest payments for new borrowing in a single year.”
“African countries will pay US$55 billion in additional interest over the lifetime of loans contracted in the five years to 2021, compared to the costs of borrowing at World Bank IBRD rates.”
ONE’s analysis also shows that lack of affordable capital will impact the whole world. Africa alone possesses vast renewable energy resources and carbon capture potential that could fuel its economic growth and transform global efforts to tackle climate change, but this potential cannot be realized without access to affordable capital.
Gayle Smith, Chief Executive of The ONE Campaign, said: “It makes neither political nor economic sense that low- and low-middle income countries are being forced to pay premium prices for capital at the very moment they are 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.”
As leaders of the G20 travel to Delhi for a vital summit this week, ONE is calling on them to implement the recommendations of their own independent experts group, accelerate efforts to reform the World Bank and triple the volume of affordable investment available to low- and low-middle income countries.
Smith continued: “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.”
