Establishing a UN Framework Convention on Sovereign Debt and a Global Debt Authority - Will this save FfD4?

The purpose of the side event was to build support for the establishment of a UN Framework Convention on Sovereign Debt and a Global Debt Authority, and to discuss with key member states their strategic positioning with regard to the proposed reform initiative.

Global public debt levels have soared to unprecedented levels according to UNCTAD’s 2024 report: "A World of Debt: Regional Stories" reaching a record USD 92 trillion and are set to exceed USD 100 trillion in 2025. Developing countries' share of the total global debt is 30% amounting to USD 29 trillion with increasing high and growing levels of external debt. As of 2022, debt servicing reached USD 365 billion globally largely as a result of high borrowing costs. Developing countries borrow 2 to 4 times more than their global counterparts in addition to still repaying their debts at higher interest rates. Their net interest rate payments on public debt have reached USD 847 billion in 2023, a 26% increase from 2021. Africa’s debt service costs in particular have risen sharply with the continent spending up to USD 164 billion in debt servicing in 2024, a monumental increase from a decade ago when debt servicing costs stood at USD 64 billion in 2010. More concerning is that out of Africa’s 54 countries, 25 spend more on interest payments than on health and food security while seven spend more on interest payments than on education.

The widening debt crisis largely emanates from a flawed international economic system. In theory, the rules-based system is meant to ensure fairness and consistency in dealings between countries. But the current architecture with institutions like the International Monetary Fund (IMF) and the World Bank have historically been dominated by developed countries holding disproportionate voting powers based on their quota allocations and influence in key decision-making processes. However, the distribution of quotas among IMF member countries and access to resources is antiquated and does no longer reflect today’s economic realities. When the IMF Board of Governors decided to boost global liquidity as response to the Covid-19 pandemic with the allocation of USD 650 billion in Special Drawing Rights (SDR), the entire African continent received USD 33 billion (a mere 5% of the total allocation). Lacking an effective creditor coordination mechanism, the existing global debt architecture is unable to comprehensively address the sovereign debt crises The current G20 Common Framework on sovereign debt restructuring, being a creditor-led and motivated initiative, remains inadequate to solve Africa's debt crisis.

The upcoming Fourth International Conference on Financing for Development (FfD4) from 30 June to July 2025 in Seville, Spain is happening against the backdrop of the rising debt crisis in a flawed economic system. Africa has positioned itself as a strong advocate to demand reforms of the international financial architecture particularly concerning debt management, sustainable development financing, and equitable representation. The African Union has highlighted the need for fair representation for African countries and a more equitable approach to sovereign debt restructuring, while the African Development Bank has called for an inclusive global financial system with greater representation by African countries. African Finance ministers, coordinated by the Economic Commission for Africa (ECA) demanded decisive action to reform the global debt architecture during the ECA’s 55th Conference of African Ministers, Planning and Economic Development in 2023.
From a civil society point of view, a significant gap in the current international financial architecture is the lack of a comprehensive multilateral resolution framework. Since the UN is mandated to address critical global issues, civil society views the FfD4 conference as the suitable forum to push for the establishment of a multilateral legal
framework under the auspices of the UN. A UN Framework Convention on Sovereign Debt as proposed by civil society will enhance responsible lending and borrowing; promote enhanced debt standstills during restructuring; regulate Credit Rating Agencies; support the development of domestic legislation; promote debt transparency of both lenders and borrowers; and ultimately even out the imbalances at the debt restructuring negotiating table.

Panelists:

• Prof. Atiya Waris– UN Independent Expert on foreign debt, other international financial obligations, and human rights
• Dr. Patrick Ndzana Olomo – Head of Division Economic Policy and Sustainable Development, African Union ETTIM Department
• Malack Luhanga, Assistant Director – Debt Data Management, Ministry of Finance and National Planning
• Kamal Ramburuth – Project Lead, Institute for Economic Justice (IEJ)
• Jorge Luna– Economist, New Financial Architecture-LATINDAD

Moderator:

• Dr. Yungong Theophilus Jong– Policy and Advocacy Manager, AFRODAD

Organizers: FES AU office in Addis Ababa together with The African Forum and Network on Debt and Development (AFRODAD)