High interest rate that Africa pays blocking its dev’t: US Economist

Addis Ababa, February 24, 2024 (FBC) – The renowned American economist, Professor Jeffrey Sachs, underscored that the higher interest rate which Africa pays than any other part of the world is blocking its effort for development.

The likelihood of interest rates staying high in 2024 and beyond presents unique challenges for many African economies, it was indicated.

African countries’ public debt levels have risen significantly in recent years due to the rapidly increase public spending of respective governments to mitigate the effects of multiple global shocks such as Covid-19 and inflation, it was indicated.

Professor Sachs revealed that Africa pays much higher interest rates than any other part of the world, ENA reported.

According to him, Africa needs capital, infrastructure, education and natural capital in order to build the continent and get great economic returns.

However, the global financing system is not working right, the economist said.

“It (Africa) should be the fastest growing region of the whole world, but with the interest rates so high, this is what is really blocking a lot of the continent’s development,” Sachs pointed out.

Thus, the renowned economist stressed the need for reforming the international financial architecture that would allow Africa for  access to low cost and long term finance.

He said: “So the basic idea of global financial reform is to make sure that Africa can access low cost and long term finance so that it can really build the infrastructure for all the modernization that is needed.”

The African Union currently expressed its commitment to accelerate the establishment of its own financial institutions to address the existing challenges of the current global financial architecture that does not favor Africa’s transformation and development needs.

The push for Africa’s financial institutions is expected to improve Africa’s access to capital, impartial debt management mechanisms, and fair credit and risk assessments.

In his capacity at the United Nations, the economist added that he is working on the agenda, pushing hard on other international financial institutions for this financial reform.

I was very strongly advocating the African Union as the 21st member of the G-20, he said, adding that now we have a G-21 and we have to push very hard for the financial reform.

The economist also criticized the rich countries that have not kept their promises, saying that “they talk a lot but they don’t really deliver.”

“That’s why we need Africa at the negotiating table to say you have to deliver. There were so many promises on climate finance. So many promises are getting the debt structure to make sense. Very little was done.”

Noting that the real negotiation is paramount, the renowned American economist stated that now this talk has to end and we need to take action.