New report by ActionAid calls for International Monetary Fund to be replaced by new UN convention on debt, highlighting that unpaid debts owed to Africa far exceed the external debts that African nations are forced to pay

Ahead of major African Union summit, a new report from ActionAid warns that a shocking 75.3% of all lower-income countries are spending more on foreign debt than on health and education, as a result of deeply unjust and colonial global economic system. Forcing African countries to forego essential public services such as health, education, and climate action in order to service foreign debts owed to rich countries, private creditors, and global financial institutions.

The report titled, ‘Who Owes Who? External debts, climate debts and reparations in the Jubilee year’ published in the week leading up to the AU Summit in Addis Ababa.

The research also calls for tax reform globally and debt cancellation as part-payment of the climate debt and other reparations owed by rich countries.

The report outlines that:

• More than three quarters (75.3%) of all lower-income countries spend more on foreign debt than health care and more than half (51%) spend more on debt servicing than education.
• Based on systematic studies, rich polluting countries owe low- and lower-middle-income countries US$107 trillion in climate debt. This is more than 70 times greater than the total foreign debt of US$ 1.45 trillion the lower-income countries collectively owe.
• This includes rich countries not paying the climate debt of at least US$36trillion that they owe to Africa.  The report reveals that in 2024,lower-income countries in Africa paid US$ 60 billion in debt repayments sacrificing health, education, people’s rights, and sustainable national development. This is having a devastating impact on the majority of people on the continent, particularly women, young people, and those on low incomes. 

According to the report:

• There is an unjust global credit rating system that is driving the debt crisis in most African countries. For instance, Africa is charged extortionate interest rates on loans compared to rich countries at an average of 9.8% in Africa, compared to the average of 0.8% for Germany. 
• This unjust economic structure facilitates multinational corporations shifting on average US$ 1.13 trillion worth of profit into tax havens causing governments around the world to lose urgently needed tax revenue. The EU Tax Observatory estimates that Ireland remains the destination of approximately $120-140bn of shifted corporate profits annually.
• The severe global debt crisis requires a fundamental overhaul of the global financial architecture that shifts the power over debt away from the International Monetary Fund (IMF) to a more representative and inclusive UN body. Governments in Africa and across the Global South must prioritise the establishment of a new UN Framework Convention on Debt to replace the present unfair, colonial architecture centred on the IMF.

ActionAid Ireland CEO, Karol Balfe, said:

“It is a travesty that African nations are being crushed under the weight of foreign debt, while the world’s richest countries continue to look the other way, evading their responsibility to pay for the climate crisis and reparations related to the slave trade and unfair economic practices.” 

 “By forcing countries to prioritise debt repayment over essential services such as health and education, or responding to the runaway climate crisis, the rich countries are pushing Africa to the brink.”

 She added: “Servicing external debts, and complying with conditions attached to IMF loans, is undermining spending on health, education, and climate action, particularly impacting women and girls. But rich countries get away without paying their debts to Africa. How is that fair?” 

“The reality is that for African countries to overcome the debt crisis and the impacts of climate change there must be debt cancellation and a complete move away from colonial debt architecture that has burdened the continent for decades. In this year of reparations, the African Union must ensure both debt cancellation and a new United Nations Framework Convention on Debt are agreed.” 

“Ireland has a critical role to play. Firstly we should support the Global South’s call for reform and debt cancellation. Secondly, while our tax policy has undoubtedly played a significant role in our economic growth, we have to acknowledge the fact that corporate profit shifting directly impacts on the ability of developing countries to address poverty and provide public services, with a particular impact on women’s rights.”

The African Union’s declaration is that 2025 is the Year of Reparations and presents an opportunity to stand up to both historical injustices and the continuing injustices that arise from the colonial international financial architecture.