Abstract:
There is a growing consensus that sovereign debt challenges in Africa are no longer only an issue of poor debt contraction and management practices, but that the sovereign debt architecture itself needs reform. Drawing on existing data, the literature and interviews with experts this study examines the state of sovereign debt in Africa, the failures of existing debt resolution mechanisms, and the urgent reforms needed to make the system more effective for African nations. The study finds that since 2010 African sovereigns have increasingly borrowed from private creditors with corresponding debt distress and defaults driven by short-term, high-cost, private debt, especially to bondholders. Reform proposals disproportionately target debt without emphasising that it is a symptom of deep structural issues that need to be prioritised for debt sustainability to be long-lasting in Africa. In this expanded creditor landscape, the reform proposals reveal an insider-outsider polarisation. Critical voices calling for a global sovereign debt resolution mechanism have gained strategic momentum but are not widespread enough for action. However, there are some tactical areas for pragmatic reforms. These include improving debt sustainability analysis tools, credit rating agency practices, and debt transparency. For African sovereigns, robust debt management systems are important as they allow pre-emptive restructurings which have been found to be better on many fronts than post-default restructurings. The analysis underscores the urgent need for reforms that integrate Africa's real sector development needs, emphasising debt architecture reforms that boost economies, but also make the architecture fairer and more efficient.