The UN Secretary-General says debt-ridden African countries are being charged ‘extortionate’ interest rates, and he announces $250 million in crisis funding

To better serve the needs of developing countries, UN Secretary-General Antonio Guterres wants far-reaching reforms to the structure of international finance.

African countries are getting a raw deal from the international financial system, which charges them “extortionate” interest rates, said the United Nations Secretary-General on Saturday, as he announced $250 million in crisis funding, including for the continent’s famine risk.

According to the opening ceremony of the annual African Union summit in Ethiopia, UN Secretary-General Antonio Guterres wants far-reaching reforms to the structure of international finance to better serve the needs of developing countries. (ALSO READ: The UN will mark the one-year anniversary of Russia’s invasion of Ukraine by urging a “just peace”)

“The global financial system routinely denies debt relief and concessional financing to developing countries while charging exorbitant interest rates,” he said.

The United Nations will spend $250 million from its emergency fund, the largest ever allocation, to respond to several crises around the world, including assisting communities in Africa at risk of famine, Guterres said later at a news conference. (ALSO READ: UN launches $397 million humanitarian appeal for Syrian earthquake survivors)

Many poor countries were forced into debt as a result of the coronavirus pandemic because they were expected to continue servicing their obligations despite the massive shock to their finances.

According to the International Monetary Fund, public debt ratios in Sub-Saharan Africa are at their highest in more than two decades.

African governments, including Ethiopia, sought debt restructuring deals through an IMF programme to help them navigate the crisis, but the process has been delayed.

Others, such as Kenya, have seen their debt sustainability indicators worsen as a result of the pandemic’s impact on their finances.

“African countries cannot climb the development ladder with one hand tied behind their backs,” said Guterres.

Ethiopia’s Prime Minister Abiy Ahmed agreed.

“Nearly all of us want to get our economies back on track, but this will take significant restructuring to make our external debt sustainable,” he said.

The summit, which brings together leaders from 55 African countries, will also address the continent’s worsening food and security crises.

Armed conflict from the Sahel to the Horn of Africa, as well as the effects of droughts and floods, have driven an increasing number of Africans from their homes.

Hunger has worsened in several countries as a result of the impact of armed conflicts and extreme weather, which scientists have linked to climate change.

After five failed rainy seasons, Somalia is on the verge of famine, with hundreds of thousands of people facing catastrophic food shortages.

“We must critically examine why one-third of the world’s hungry people live on our continent,” Abiy said.