Areas of action for a New Global Financing Pact

Together the two continents can play a leading role in the international arena. This also means addressing the current flaws in the multilateral architecture – beginning by a rapid decision in favour of an African Union seat at the G20. Key will be encouraging coalitions of interest for AU and EU to have a meaningful shared impact at multilateral level: coalitions of member states joining forces around issues of common interest can complement institutional processes, offering greater agility and speed in addressing urgent and complex transnational issues in all development domains, be it energy access/transitions, food security, global health, climate adaptation, mobility, and youth economic, social and political inclusion.

Fighting Illicit Financial Flows (IFFs) is embedded in the commitments of the most recent EU-AU Summit (February 2022 under the Sustainable Growth Chapter). IFFs represents a critical constraint to unlocking African domestic resources to finance African development needs during a time of fiscal tightening and looming sovereign debt crisis. IFFs have the potential to severely impact economic stability and economic opportunities, by depleting foreign exchange reserves, creating unfair market competition, artificially inflating property prices, or diminishing tax intake. It is high time to identify barriers to address and measures needed to finally implement the key recommendations of the Thabo Mbeki Report commissioned by the AU/ECA Conference of Ministers more than a decade ago.

This is key to increase access for African countries to money at low rates of interest and demonstrate Europe’s willingness to meet the commitments made in Paris two years ago at April 2021 Summit, reconfirmed at the 6th AU-EU Summit. Currently, political decisions need to be taken by major shareholders to agree to reallocate SDRs to Africa. It is critical to support the African Development Bank’s proposal to recycle SDRs using a hybrid capital instrument, allowing them to be leveraged at a 1:4 ratio on capital markets to issue bonds and mobilise lending funds. This would allow for SDR donor countries to receive interest payments from the AfDB and borrower countries to receive highly concessional loans by an institution that has both regional and sectoral expertise. Focus and speed to provide debt relief for debt stressed countries remains a critical issue and requires a strengthened Africa- Europe Partnership.

The 6th EU-AU Summit agreed to adopt new mechanisms for monitoring progress on commitments, as this is key to restore trust severely damaged by the ongoing inability to deliver on commitments made at highest levels. This approach should be embedded systematically within all key multilateral initiatives, beginning with the Paris Summit for a New Global Financing Pact. There is growing mistrust with institutions and current institutional initiatives are suffering from a lack of authenticity, credibility and visibility among the people they are set up to serve. This also includes ensuring funding priorities and mechanisms are increasingly shaped by organisations working on the ground, as expressed consistently through AEF focus group work and multi-stakeholder dialogues in 2023.