The Global South, Development & Financing

Summary 

The aim of this project is to analyse the problems of indebtedness and over-indebtedness of many sub-Saharan African countries and the difficulties of negotiating and restructuring their debts, which can jeopardise short-term financing as well as the financing of critical development sectors such as health, education and infrastructure, putting economic growth and development at risk.

Description and objectives 

The issue of public debt sustainability in sub-Saharan Africa is not new. The IMF and the World Bank launched the Heavily Indebted Poor Countries (HIPC) initiative in 1996, followed in 2005 by the Multilateral Debt Relief Initiative (MDR), which led to strong debt relief in many African countries.

The 2000s were hopeful years, with Africa trying to keep up with global economic growth. Many African countries sought to modernise their economies and invest in infrastructure, health and education, thus resorting to financing from official bilateral creditors (e.g. IMF and World Bank), but also from new bilateral creditors (e.g. China, India, Gulf States) and the financial markets in general.

With the shock of Covid-19, the sovereign debt of African countries has almost doubled and debt servicing has become more onerous. Faced with this worrying scenario, the G20 launched the Debt Service Suspension Initiative (DSSI) in May 2020 and, in November 2020, 

the Common Framework for Debt Treatment Beyond the DSSI, a forum to address the problems linked to the liquidity and sustainability of debts.

However, the issue of debt sustainability and, in particular, the problems of over-indebtedness, continue to raise many concerns, with many voices criticising the international financial architecture such as Pope Francis calling for debt forgiveness on the occasion of the Jubilee.

This project therefore aims to analyse the international architecture of sovereign debt restructurings, as well as the initiatives taken at African level (e.g. the establishment of the African Legal Support Facility).

Methodology 

The analysis includes contributions from African professors and researchers, mainly from Angola, Mozambique and Guinea-Bissau, countries with strong cooperation ties with Portugal, but which face serious problems linked to their public finances and the sustainability of their public debt.

The creditors (official, bilateral and private) will be identified, as well as the financing agreements signed, the legal acts approving the loans and the impact on public finances and the economy.

The aim is also to hold seminars and conferences with academic, financial and social organisations from African countries to discuss the issues of sovereign debt sustainability and the legislation in force in these countries.

Expected Results 

This project will contribute to a better understanding of the problem of sovereign debt sustainability in the Global South, particularly in sub-Saharan Africa, and will provide insight into the specific problems faced by debtors and creditors and the difficulties of financing in a period of financial restriction (e.g. even China has been reducing its financing to sub-Saharan Africa).

We hope to publish at least one book on the sovereign debt problem in Africa, as well as several articles in national journals (at least one journal in each of the following countries: Portugal, Angola, Mozambique and Guinea-Bissau) and international journals (2).

Project Team

Duration: 2024-2026

Project ongoing