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Financing Africa's rising -- Q&A with Jason Braganza of Tax Justice Network - Africa

07 October 2016

Tradition aid will not cover the full cost of implementing the Sustainable Development Goals (SDGs). As African governments seek other sources of finance, there is growing concern they are taking on too much debt.

 

Jason Braganza, deputy executive director for Tax Justice Network - Africa, explains why this is such cause for concern.

Q: Why have African governments been taking on more debt?

A: Many African countries have undergone sustained economic growth -- the magic 7% put forward by the IMF -- promoting them to a new economic classification and giving them access to a wider range of financial instruments.

Governments have taken advantage of this access to take out non-concessional loans to finance big infrastructure projects -- new roads, railways, ports, airports.

Jason Braganza

Q: And why is this so worrying?

A: Concessional loans are highly linked to the global financial system. If one country defaults there'll be ramifications for the global economy, which is still very fragile.

It's also worrying for the SDGs. We know traditional aid will not be able to cover all the costs associated with implementing the goals -- estimated between $600 billion and $1.2 just for Africa. This means African governments will need to find new sources of funding, and an important source is debt. But there's a real concern that many African countries are already overexposed.

This is the same conversation we had 20 years ago as we set out to work on the MDGs -- the Millennium Development Goals. Many African countries were heavily indebted and we knew the only way they had a chance to meet the goals was if we relieved them of their debt. This led to HIPIC and MDRI -- the Highly Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative.

Here we are, 20 years later, having the same conversation. It may be time to start thinking about HIPIC and MDRI 2.

Q: What needs to be done?

A: We urgently need to establish internationally agreed mechanisms for restructuring debt. Otherwise, countries that undertake their own debt workout in the future may fall victim to vulture funds, as in the case of Argentina.

There is also an immediate need for a global tax body, similar to the International Monetary Fund, to police the international financial system from a tax perspective. This would help stop corporate tax evasion and avoidance, which cost developing countries up to 200 billion a year -- money that could help governments fill the SDG financing gap.

These are two steps that civil society called for in Nairobi in July at UNCTAD 14, and we really hope to see UNCTAD play a lead role.