A new policy paper by the Tony Blair Institute (TBI) proposes a $100 billion Debt Swap Facility with a reform-linked mechanism dubbed “Moving up the Ladder” to tackle crippling debt burdens faced by African economies. The nonprofit, founded in 2016 by former British Prime Minister Tony Blair, published A New Debt Deal for Africa: Moving Up the Ladder, this month as a follow-up to a foundational report from February.
The policy paper is grounded in a central debt injustice: African countries, with debt-to-GDP ratios often lower than the G7’s, face interest rates four to five times higher. In 2023, African governments allocated 18% of revenues to interest payments, versus 3% in the EU and 5% in the G7. This often leaves scant resources for essential investments in education, healthcare, and infrastructure.
Ethiopia, which secured a debt restructuring deal with official creditors through the G20’s Common Framework in July, exemplifies this challenge. From the record 1.93 trillion Birr federal budget ratified for the current fiscal year, a staggering 39% of recurrent expenditures, or around 463 billion Birr is allocated for debt servicing. Notably, the allotment for debt servicing is 48 billion Birr more than funds apportioned to capital expenditures.
Building on the prior report, A New Debt Deal for Africa: Breaking the Vicious Cycle, the latest paper develops the case for a debt facility that could refinance existing obligations at lower rates, promote better governance, and break the negative risk-perception spiral, without requiring new aid from donors.
No Comment Found.