Building an African consensus on inclusive finance

African leaders and key institutions are coming together to build an African consensus towards inclusive finance in an effort to reform the global financial architecture. The theme of this year's African Development Bank Annual Meeting held in Nairobi, Kenya, focused on global financial architecture reforms to enable economic transformation for Africa. During an interview with CNBC Africa, Hanan Morsy, Deputy Executive Secretary & Chief Economist of the United Nations Economic Commission for Africa (UNECA), emphasized the importance of three key areas to achieve a more just and equitable global financial system that benefits Africa. The first area identified is the need for affordable finance at scale to support investment and development. Morsy highlighted the approval of a proposal by the International Monetary Fund (IMF) to re-channel special drawing rights to multilateral development banks, allowing for the leverage of resources to provide affordable finance. This approval marks a key milestone in enabling regional development banks to play a larger role in financing development projects. The second key area is the establishment of a functioning debt resolution framework. African countries currently face a critical situation where 60% of them spend more on servicing debt than on essential sectors like health and climate action. Morsy stressed the urgency of overhauling the G20 Common Framework to make debt resolution more timely and effective, expanding eligibility to include middle-income countries, and implementing measures to reduce technical disputes. The third area of focus is to amplify and ensure sufficient voice and representation of Africa at the global stage. Morsy emphasized the importance of African countries having a seat at the table in decision-making processes, particularly through quota reforms at the IMF. Empowering African nations with a stronger voice in global financial institutions is key to shaping policies that benefit the continent. Morsy also addressed the issue of the risk premium that Africa bears, pointing out that the continent cannot make substantial progress in addressing Sustainable Development Goal (SDG) investment needs without tackling the cost of debt. He highlighted the importance of integrating climate-resilient debt clauses, reducing the cost of debt through data availability, and incentivizing proactive debt restructuring to prevent countries from waiting until they are in a crisis. The interview further delved into the core messaging of the meetings, focusing on the commitment of African governments and policymakers to drive change and accountability in financial reforms. Morsy underscored the need for both African nations and international creditors to play their part in reshaping the financial landscape for the future. By investing wisely in areas with high returns and leveraging financial resources effectively, African countries can pave the way for a sustainable and prosperous future. As the discussions at the AfDB Annual Meeting centered around the urgency of reforming the global financial architecture, Morsy highlighted the strong commitment among African leaders to take ownership and drive necessary changes. With Africa being the youngest continent, the stakes are high to ensure that future generations do not inherit the same financial challenges. By fostering a collaborative approach and pushing for inclusive finance, African leaders are laying the groundwork for a more resilient and prosperous future.