Public Debt and Financial Stability in Africa. Prolegomena for Setting-Up a Regional Financial Safety Net for the Continent

This paper analyses Africa’s new wave of debt crisis and the limitations of the recent debt resolution initiatives. The Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt Treatments have not been up to the challenge of the rapid debt accumulation over the past decade, its changing structure, and the associated financial risks in Africa. The paper then calls for the creation of a regional financial safety net (RFSN) for debt resolution, management, and prevention on the continent. The key features of this RFSN are presented. Yet, few critical strategic issues would need to be addressed to ensure effective implementation of this RFSN. Few questions that arise are: How the financial structure of this RFSN will be setup? What role (if any) should non-regional members, in particular advanced countries will play in the governance structure and decision-making process of this RFSN? What would be the relationship between this RFSN and existing financial institutions in Africa, including the African Development Bank, the African Monetary Fund, and the African Central Bank, whose creation is announced for more than twenty years, but is not implemented yet? What role and what would be the relationship with the International Monetary Fund (IMF)?