Former Minister of Finance Kemi Adeosun said African countries often find themselves in debt crises because they fail to cut social spending.
Mr. Adeosun, who served as a cabinet minister from November 2015 to September 2018 during the administration of former President Muhammadu Buhari, was a member of the Nobel Prize-winning economist Joseph He said this during a panel discussion with Stiglitz. Monday in Paris, France.
Mr Adeosun said: “The reason debt restructurings like Zambia’s took so long to implement was the failure to act before default occurred.
He pointed to the “mismanagement of the pre-debt crisis period” and said countries in debt crisis are reluctant to admit it because they need to cut social spending, especially democratic spending. He added that there are many cases.
“The lack of an international mechanism for sovereign debt restructuring hinders Africa’s prospects for achieving sustainable public finances or contributing to the clean energy transition.
“That means there is a tendency to ‘kick the can down the road.’ Eurobond holders need to start a dialogue with the sovereign ahead of a potential default,” Adeosun told Africa Report.
He added that while there would be a loss of time if the affected sovereign countries were able to continue servicing their debts, such talks would ensure a “head start” on the process should reconstruction be necessary. He claimed to be deaf.
Stiglitz, also speaking at the event, said debt restructuring was made even more difficult by the difficulty of coordinating creditors as diverse as China and Western hedge funds, which are “distrustful of others.”
“We do not have a sovereign-wide debt restructuring framework and, as a result, debt restructuring is too little, too late.
“Private sector financial institutions have shown themselves to be bad at risk assessment, as evidenced by the great financial crisis that began in 2008. In his eyes, the West has learned nothing since then. not present”
“There is an incentive not to learn and not to react to the predictable.Africa’s debt growth is due to the sudden withdrawal of capital inflows from Western countries and China in the wake of COVID-19. The award-winning economist added that this caused “potentially huge problems”.
Since Zambia defaulted on its debt in November 2020, Zambia’s debt restructuring has been protracted, and in June it reached an agreement in principle with its creditors, including China, for $6.3 billion in debt, but no final agreement has yet been reached. Please remember that we have not yet reached this point. .