Accra: Professor Olabisi Delebayo Akinkugbe, the Purdy Crawford Chair in Business Law at Dalhousie University in Canada, has urged the African Union (AU) and its member states to take immediate steps to safeguard African Multilateral Financial Institutions (AMFIs). The call comes amid growing concerns over the potential undermining of the continent's financial architecture due to recent downgrades of sovereign debts by international rating agencies.
According to Ghana News Agency, Professor Akinkugbe's insights are based on research from a symposium on the African Financial Architecture and African Multilateral Financial Institutions in Context. He emphasized the need for reform in the global financial architecture, following the recent Fitch Ratings downgrade of the African Export-Import Bank's (Afreximbank) long-term foreign currency rating from 'BBB' to 'BBB-' with a negative outlook.
Professor Akinkugbe highlighted the downgrade's critical consequences, pointing out that AMFIs are being treated as ordinary commercial lenders instead of recognizing their Preferred Creditor Status (PCS), which has historically exempted them from debt-restructuring arrangements. This could impact countries like Ghana, South Sudan, and Zambia in meeting their debt obligations to key institutions such as Afreximbank and the Eastern and Southern African Trade and Development Bank (TDB), potentially setting a dangerous precedent that could hinder Africa's development goals.
He advocated for measures that would create fiscal space for African states to access affordable financing and enable AMFIs to provide alternative development funding that aligns with Africa's economic needs. The Associate Professor of Law explained that AMFIs are well-acquainted with the economic vulnerabilities prevalent in African countries and are increasingly offering products tailored to address these specific challenges.
Unlike traditional international lenders, AMFIs present solutions that are specifically designed for African issues, often providing the most cost-effective financing options available to economically challenged nations. For countries like Zimbabwe, AMFI financing often represents not just the most affordable choice but sometimes the only feasible option due to the unfair risk premiums imposed by international markets on African borrowers.
Professor Akinkugbe warned that weakening AMFIs would exacerbate Africa's dependency on an inequitable global economy and emphasized that strengthening the continent's financial architecture is crucial for Africa's financial sovereignty and the preservation of diversity within the global financial system. He concluded that calls for reforming the global financial architecture are incomplete without fully recognizing the multilateral and PCS status of AMFIs as equal partners in their own right.
