President Paul Kagame on Tuesday, September 19, stressed the need for reorganizing the international financial mechanism, describing the matter as a real substance for Africa’s future, not a competition for the geopolitical influence that has been going on.
Kagame made the call at a high-level roundtable titled “Towards a Fair International Financial Architecture” at UN headquarters on the sidelines of the 78th UNGA session. He noted that while he agrees with the notion of changing the world, much more can be done, without waiting.
“I agree with the ones who say we need to change the world, but at least we have to be honest, if we can’t change the world, we have to change ourselves to move along with the world that is changing. But remaining the same in a changing world simply defeats logic and doesn’t make sense,” he said.
Kagame said that rising inflation has put pressure on the global economy, especially at a time when countries are rebuilding from the Covid-19 pandemic. The result, he said, has been tightening of monetary policy disproportionately, impacting low and middle-income countries.
“Now is the time to come together, to make the international financial system fit for purpose. This is a matter of real substance for Africa’s future not a competition for the geopolitical influence that has been going on. We simply need the fiscal space to finance our development and protect ourselves against climate and health shocks. Africa has a right to that, absolutely.”
The President also suggested examples of how various financial aspects can be handled differently and better, moving forward.
First, he said: “We must accelerate the debt management process through the G20 common framework.”
“Secondly, rich countries should continue to honor the commitment to allocate part of their special drawing rights to lower-income and developing countries. This reallocation should be based on need, not on wealth.”
Equally important, Kagame called for more private investment and financing, noting that financing from the multilateral banks will never be sufficient.
“But we do have to significantly simplify and speed up the process of approving loans and disbursements from international financial institutions.”
“Finally, developing countries are unfairly paying high-risk premiums and everyone is lamped together according to the lowest common denominator. We need to work together to address this. These are extra costs that come on top of the already high interest rates,” he added.
“Far from charity”
Kagame said that what Africa needs most is not charity.
“We are not talking about charity, ultimately the reforms to the international financial institutions will benefit all of us.”
Fortunately, he said, the political will to change seems to be slowly emerging, “and we hope this trend gives us faster results.”
Kagame hailed initiatives like the Bridgetown Initiative and the Paris Summit for a new Global Financial Pact, saying that they were important examples. Led by Barbados Prime Minister Mia Mottley, the Bridgetown Initiative aims to unlock climate finance. It proposes urgent reforms to the global financial architecture to meet these objectives, and it calls for a tripling of concessional loans and grants to the world’s poorest countries.
“Another important example is the IMF’s Resilience and Sustainability Trust which happily, Rwanda was among the first to benefit from.”
“The challenges before us are big but together we can surmount them.”
The Resilience and Sustainability Facility (RSF) provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness.
In January, Rwanda became the first country in Africa to access the IMF Resilience and Sustainability Facility (RSF) for $319 million in highly concessional financing to advance efforts in building resilience against climate change. Rwanda was the third country worldwide alongside Costa Rica and Barbados, to successfully access funding under the Trust.