Economic Growth: How Africa Can Adopt A High-Performing Financial System

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Economic Growth: How Africa Can Adopt A High-Performing Financial System

18 déc. 2024 18:27

Finance is crucial for development. Without a well-functioning financial system that channels finance to the right places in the right form, inclusive growth is impossible. This is not just a question of the quantity of finance, though this is extremely important, but also what we might call its quality. Different types of economic activities (and actors) require different types of finance in terms of cost, maturity and risk characteristics. The more financial systems are able to meet these needs, the more likely they are to be supportive of inclusive growth. As well as its potential to foster growth, however, the financial sector can also generate instability and crises, with devastating consequences. Thus adopting an efficient financial system is crucial for Africa’s economic growth and development. The current global financial architecture faces significant challenges in addressing the financial needs for climate action, sustainable development, and debt management. The calls for reform are growing louder, seeking to create a more equitable, inclusive, and sustainable financial system. The just ended Africa Financial Summit – AFIS which held in Casablanca on December 9-10, 2024 on the theme, “A New Era; Time to Mobilise Africa’s Financial Power” was a platform for exchange and reflection on how Africa can adopt a high performing financial system capable of pushing economic growth in the continent. Over two days of conferences, debates and high-level meetings, African financial sector experts strived to develop concrete solutions to the many challenges facing the sector and build a more inclusive and robust pan-African financial services industry. Africa needs to build a prosperous, inclusive, and resilient financial system. However, a troubling trend has emerged: governments worldwide are grappling with mounting public debts, limiting their ability to invest in core social services that their citizens so desperately need. The average public debt in Africa is around 65 per cent of GDP, amounting to $1.1 trillion, with some countries having much higher debt levels. Alarmingly, nearly 40 per cent of African countries are in, or at high risk of, debt distress. To make matters worse, 60 per cent of African nations now spend more on servicing their external public debt than on healthcare. The existing global debt architecture is ill-equipped to address the pressing needs of African countries. Urgent reforms are required to turn the tides of a gloomy financial system. Africa must explore innovative solut...