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New Global Financial Pact: what's in it for Africa?

5 July 2023

News

On 22 and 23 June, Paris hosted the summit for a new global financial pact. Aimed at giving political impetus to the reform of the global financial architecture, finding solutions to climate change and global poverty, and strengthening cooperation between North and South, the summit was held a few months before COP 28 (November-December, Dubai) and the annual meetings of the World Bank and IMF (9-15 October, Morocco). Despite its innovative nature, the summit did not result in a complete overhaul of the financial system. The Paris summit produced only the outline of a new pact, which did not convince everyone. A dozen African heads of state were present, including Kenyan President William Ruto, Mauritanian President Mohamed Ould Ghazouani, Zambian President Hakainde Hichilema, Ghanaian President Nana Akufo-Addo and Gabonese President Ali Bongo. What are the results of this meeting for the African continent?

A few multilateral announcements…

Multilateral banks such as the World Bank have announced that they will increase their financing capacity by USD 200 billion over the next ten years to support low-income economies. This decision obliges them to take greater risks and could lead the countries of the North to inject more liquidity. It is also a call to the private sector to support this dynamic. IMF Managing Director Kristalina Georgieva also said that the goal of mobilising USD 100 billion via the reallocation of Special Drawing Rights, for the benefit of the most vulnerable populations, had been achieved. Initiated by French President Emmanuel Macron in 2021, this initiative aims to provide lasting assistance to poor countries in their fight against poverty and global warming.  

...and a handful of landmark decisions

Senegal has been granted EUR 2.5 billion to reduce its dependence on fossil fuels, in particular fuel oil, as part of a Joint Energy Transition Partnership (JETP) with France, Germany, the United Kingdom, Canada and the European Union. Senegal thus becomes the second African country after South Africa to benefit from the JETP. The country is committed to achieving a 40% share of renewable energy in its energy mix (compared with 30% at present) by 2030. This commitment includes the use of natural gas as a transitional energy source. The announcement of this funding comes as production from the Grand Tortue Ahmeyim gas field is due to begin by the end of 2023. More than two years after the country defaulted in 2020, an agreement to restructure Zambia's debt has been reached. The country's creditors, including China, have agreed to restructure USD 6.3 billion of debt. The agreement provides for an extension of maturities and a reduction in interest rates.  

What is next ?

The summit was seen by many observers as a milestone on the road to restructuring financial institutions, not least because of its stated desire to include the economies of the South more fully in the decision-making process. For the African continent, there are many issues at stake at this summit, including the establishment of a fairer financial system that is less oriented towards the West, announcements on debt cancellation, and the creation of mechanisms to remove obstacles to private investment in emerging countries. In the specific case of Gabon, the President called for international mobilisation to provide financial support to countries committed to preserving their forests in order to strengthen conservation capacities. However, these long-awaited reforms are unlikely to see the light of day in the short or medium term, even though the World Bank has announced that it is considering introducing a clause temporarily suspending debt repayments in the event of a climate crisis. Such initiatives, seen as half-measures, will not satisfy the NGOs and African countries concerned. They will make it possible to contain demands until the next major international meetings, such as the G20 (9-10 September 2023) and COP28 (30 November-12 December 2023), which will provide an opportunity to make progress on more far-reaching reform projects.    

About the author

Carine Gazier is a project consultant at Concerto, she focuses on political-economic issues and the energy sector in Africa. For further insights and analysis, or to better understand how Concerto can support your business, please email insights@concerto-pr.com.