Experts discuss debt reform, sustainable finance and fiscal resilience

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Participants at the just concluded UN Economic Commission for Africa say “Africa’s debt challenge extends far beyond fiscal concerns as it has become a development crisis, a climate vulnerability, and a governance emergency.

The forum discussed the relationship between sustainable development and debt sustainability, credit ratings, and borrowing costs, as well as how debt management offices can leverage these interactions to support development.

This was during the UN Economic Commission for Africa (ECA) and Financial Sector Deepening (FSD) Africa that took place on Friday in Addis Ababa, Ethiopia, under the theme: “Enhancing Fiscal Space and Debt Sustainability”

“The global debt system must shift away from prioritising wealthy lenders over the development and well-being of citizens. Africa's debt managers are building that shift instrument by instrument, institution by institution,” ECA Deputy Executive Mama Keita said.

She highlighted that African debt managers are not merely administrators of inherited liabilities but stewards of intergenerational equity, making decisions that will shape the opportunities of tomorrow.

“Despite current economic headwinds, Africa’s macroeconomic fundamentals have demonstrated resilience, but this momentum is threatened by our debt burden: External debt has reached approximately U$1.2, representing a significant share of GDP, and in many countries, more than a quarter of public revenues are now absorbed by debt service,”  ECA Executive Secretary Claver Gatete stated.

Meanwhile, Semereta Sewasew, the Ethiopian State Minister for Economic Co-operation, explained that debt management is no longer a technical function of government, but rather is now central to macroeconomic stability, development strategy and policy.

“An important lesson is that debt sustainability is not only about the size of debt, but about its structure, the foreign exchange backing it, and the credibility of policy frameworks.”

Jointly organised by ECA and FSD Africa, the Second African Forum on Sovereign Finance took place as global discussions on debt reform and climate finance are setting new benchmarks for sustainable development financing.

The Forum provided African Debt Management experts with a platform to operationalise post-COP30 priorities, aligning sovereign debt management with the evolving global architecture for sustainable and climate finance.

Discussions focused on how African stakeholders can innovate by linking Medium-Term Debt Strategies, Debt Sustainability Analyses, and Liability Management Operations with environmental, social performance targets and reforms to help optimise economic growth while transforming Africa’s debt management.

The Forum also examined the IMF’s Debt Sustainability Framework, where participants identified significant gaps: climate downside risks are modelled in, but the risk-reduction benefits of resilience investments are not.

The forum also aimed to foster partnerships with philanthropic foundations, multilateral agencies, and guarantee providers and support the joint design of guarantee and risk-sharing mechanisms tailored to African debt contexts.

“Current circumstances suggest that we should double down on financing strategies for climate and nature action to build medium and long-term resilience. The connection between sovereign debt and climate, sovereign debt and domestic capital markets reform are part of an interconnected system, and we should look at how these things come together,” Mark Napier, CEO of FSD Africa, said.

African economies are currently navigating an increasingly complex policy landscape shaped by tightening fiscal space, rising debt vulnerabilities, and escalating climate risks.

This combination of pressures is impacting macroeconomic resilience and limiting governments’ capacity to invest in sustainable development, including critical sectors such as health or education.