Foto: "Kenyatta International Conference Centre", Kenia by Monika Babski. Copyright © by epo.de
On Monday (15th of July), Kenyan President William Ruto accused the Ford Foundation – a US-based philanthropy that promotes social justice and democratic values – of sponsoring violence and anarchy in Kenya (which Ford denies). It was an unusual move. It seems that Ruto (still) believes that meddling foreigners – and not citizens’ anger over his plan to raise taxes to address a fiscal crunch – sparked the protests that led to the storming of parliament and dozens of deaths, reports ONE.
But discontent after decades of bad governance, poor living conditions, and painful economic policies is very real. And not just in Kenya. Nearly 3 in 5 Africans say their country is in worse shape economically than a year prior. More than half describe their living conditions as “bad.”
There are numerous and complex reasons behind the fiscal challenges and difficult living conditions in Kenya and other African countries. Poor public management is one, and can’t be overlooked. But Africa’s growing debt problem risks reversing decades of progress, pushing millions of people into poverty, and setting off political instability, as we just witnessed in Kenya. And that is bad for everyone.
Fortunately, it’s a problem with known solutions:
Problem: African debt
Africa’s debt nearly tripled between 2010 and 2022. The pandemic, Russia’s invasion of Ukraine, and soaring inflation worsened the problem. 20 low-income African countries are either bankrupt or at high risk of debt distress, and debt payments are eating up a greater share of government revenue. Even before the pandemic, more than 30 African countries spent more on debt service than on healthcare. Kenya spent far more to service its debt in 2024 than it spends on health and education. Against this backdrop of austerity spending, Ruto’s plan for people to pay more for staple goods proved a bridge too far.
Solutions: Fiscal support and debt relief
Money bump: Countries facing a debt crunch need low-cost capital to help pay bills, continue to invest in their people, and get back onto solid financial footing. G20 countries can help by supporting much-needed reforms to multilateral development banks. That could unlock up to US$1 trillion that could be lent at below market rates. And donor countries could or should increase their contributions to the World Bank’s International Development Association by 25% this year. That would give a significant boost to the world’s largest source of concessional finance, which supports more than 70 of the world’s lowest-income countries, states ONE.
Sweet relief: Debt-stressed countries also need a breather in the form of debt restructuring. The G20’s Common Framework was a good idea whose implementation has been not so good. As a result, only four countries have applied, and it’s taken years for them to see results. So here’s a challenge to the G20: Prove that the Common Framework is worth keeping. Creditors should have their debt payments paused upon application, the process should be clarified to foster good faith negotiation, and eligibility should be expanded to middle-income countries. The Common Framework’s flaws have long been (well) known. It’s (well) past time to fix them.
The numbers
- 10 fewer African countries (22) were classified as “low-income” (defined as having a Gross National Income of less than US$1,145) in 2023 compared to 1987 (32).
- 48: Google and Microsoft each consumed more electricity in 2023 (24 terawatt hours, or 1 trillion watt hours) than 48 African countries consumed in 2022.
- 1.1% of the US$2.8 trillion needed between 2020 and 2030 for African countries to implement their climate action plans has been mobilised.
Source: www.one.org
Jeffrey D. Sachs: