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Climate finance: Effective domestic debt management is crucial for African countries

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This statement was made by Jean-Paul Adam of the Office of the United Nations Special Adviser on Africa (OSAA), during a session entitled: “Navigating the debt, development and environmental crises: the role of sustainable budgeting”.

According to Adam, it is important for African countries to assess the potential future costs of interventions and their relative impact on effective debt management. As such, key performance indicators (KPIs) must align with resilience efforts and remain simple and country specific.

Mr Adam said budget labelling is crucial to track and identify gaps, and thus facilitate the mobilization of new financing. In addition, debt management strategies, such as debt refinancing, can help build resilience. He added that the exploitation of resources available through the African Development Bank (AfDB) can now allow countries to increase their resilience capacities.

On the importance of sustainable budgeting, another panelist, Nassim Oulmane, Acting Director of the Division of Technology, Climate Change and Natural Resource Management at ECA, said that it is crucial to put in place country-specific sustainable budget adjustments, with national credits to create relevance. It would also be important to use machine learning technical algorithms, which will connect African countries to facilitate data sharing and to learn from each other on sustainable budgeting.

On risk perception management, Mr. Oulmane said there is a need to move from adhoc to systematic approaches to sustainable financing across the African continent to bring about change. And for that, capacity building is crucial for sustainable budgeting.

Alexandra Sádler of the University of Edinburgh noted that there is a gap in adaptation and resilience funding in government budgets. Attention is drawn, however, to the need to harness existing government budgets to achieve full impact in adaptation financing, such as various investment opportunities.

James Kinyangi of the African Development Bank noted with regret the large number of African countries currently facing the phenomenon of debt overhang. An evidence-based approach and priority should be given to capacity-building tailored to the specific needs of each country. According to him, fragile countries can lose up to 4% of their GDP due to crises, underscoring the urgency of tackling this problem.

The African Development Bank (AfDB) has committed to dedicate 40% of its funds to climate finance and plans to increase this amount to 5-10 billion dollars between 2022 and 2025. These funds will be allocated to support the Sustainable Development Goals (SDGs) and climate initiatives.

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