President William Ruto has called for a new global financial system and a shift in climate change financing as he stepped up his push for a new world order.
This week in Paris, France, at the ongoing New Global Financial Pact Summit, Dr Ruto has made two big suggestions on Bretton Woods Institutions and climate change, adding to his list of radical ideas on the ditching of the US dollar in intra-Africa trade, reforms of the African Union, and radical changes in the powerful United Nations Security Council.
Some 50 heads of state, along with international institutions and civil society representatives, are attending the Summit. It aims at developing a new global financial system so that vulnerable countries can be better equipped to combat poverty and climate change. Currently, poorer countries have to pay as much as eight times more in interest rates than rich nations "because they are profiled as risky", Dr Ruto said.
"We want to pay, all of us," he said. "As we continue the tension and the finger-pointing, the world is burning.
"We want to repair [trust] by avoiding the blame game."
The President then used some salty language to drive home his point. "We don't want to say the North is the one that brought about this problem. They are the emitters. That is also true, but we don't want to go there. Today we are all in shit."
Dr Ruto also wants the World Bank and the International Monetary Fund (IMF) to extend the tenure of Kenya’s debt that is due to the lenders over the next 10 years to be repaid in 50 years even as he called for fairness in the global financial system.
He was speaking during a round-table with French President Emmanuel Macron, IMF Managing Director Kristalina Georgieva and World Bank Group President Ajay Banga. The World Bank is Kenya’s external largest lender, having issued about 29.1 per cent of the country’s total external debt while the IMF is the fifth largest with 5.0 per cent.
“Let us agree that the money we are supposed to pay for the next 10 years as repayment of the debt, let us convert it into a new loan that is [for a duration] of 50 years with a 20-year grace period,” he said.
The Head of State has been on the offensive in recent weeks during which he has implored African countries to trade amongst themselves using their currencies in the push for de-dollarisation.
Just last week, he said African countries should trade with their own currencies to reduce reliance on the US dollar, which has strengthened significantly against many currencies, leaving poor economies in turmoil.
In Paris, Dr Ruto said Kenya and the Global South are struggling with liquidity amid growing debt repayment obligations that have placed a significant strain on their budgets, thus affecting their ability to fund projects.
His call comes at a time when Kenya is set to face huge pressure to pay a Sh280 billion ($2 billion) Eurobond that matures in June next year. Further, tax revenue collection is lagging way behind target, with the Kenya Revenue Authority (KRA) facing a deficit of Sh367 billion even as the FY 2022/23 draws to a close next week. “We (Kenya) need emergency liquidity, debt relief, we need new money with urgency and with scale,” said Dr Ruto.
He reiterated his stance that the global financial architecture must be of equals and that the resources should neither be controlled by the World Bank nor the IMF. “Africa does not want anything for free. But we need a new financial model where power is not in the hands of the few,” he said, adding it will ensure “we all have fair access to resources”.
“We get development resources eight times more expensively than others. We have inadequate resources and it takes forever to access it.”
Mr Macron noted that a bold and targeted approach can transform the world, adding it is time debt sustainability and climate vulnerability were integrated.
“We need a diverse but inclusive discussion on climate change to fix the game. No one should be left behind; not even China.”
Mr Macron called for the reconditioning of the World Bank and the IMF on how they operate compared to the realities at the grassroots. “It should be done with speed and urgency.”
Dr Ruto’s call in Paris echoes that he made at the opening of the Africa Energy Forum in Nairobi on Tuesday. He said global development financiers apply different rules to different countries, hence poor countries considered riskier to loan, especially in Africa, are slapped with much higher interest rates than their wealthy counterparts.