The global financial architecture is weaponised against African nations, which adversely impacts fiscal and monetary policies.

South Africa supports the G20 Summit agenda for 2025, which aims to reduce debt, fight inequality, and raise climate funding. In the chain of creditors, who is responsible for the debt? The global financial system was established three centuries ago to allow governments to borrow money indefinitely. Every pay-out, crisis, and bailout in an internal upward-flowing system benefits the architects. Unfortunately, this structure makes it extremely difficult for households to increase their equity and compels them to repay debt indefinitely.

Due to the institutional arrangements made at Bretton Woods and the underlying economic realities, an international monetary and financial system (IMFS) based on the dollar and focused on the United States was unavoidable in the early post-war decades. Despite the expectation that the collapse of Bretton Woods would result in a more symmetrical IMFS in 1973, the US continues to play a vital role, and the dollar remains the most important currency.

The IMFS is now a more market-led organisation that plays a crucial role in cross-border finance, having changed from a largely government-led system based on fixed exchange rates and restricted private capital mobility.

As a result, rather than being timid about the crisis, the G20 Summit should examine the architecture of the IMFS rather than the symptoms of its decline. To accomplish the other two agenda items, increasing climate finance and combating inequality, an equitable IMFS is required.

In an insightful 2009 speech, Andrew Crockett expressed his strong belief that the IMFS needed reform in the wake of the Great Financial Crisis of 2007–2008. He advocated for increased international cooperation through processes that allow "all participant countries to feel that their views are adequately taken into account" to manage financial risks and accidents.

Therefore, the African continent has a chance to express its developmental trajectory at the G20 Summit. It is interesting to note that non-traditional creditors do not always abide by the G-20's operational standards or the OECD's principles. It is expected that increased borrowing in Sub-Saharan Africa will bring about productive public investment in essential infrastructure, promote economic growth, and eventually end severe poverty.

It is a sad fact that SSA's public debt levels have steadily increased, its public health and infrastructure are underfunded, and poverty and unemployment rates are persistently high.

Several studies demonstrate that governments with excessive debt spend more on debt repayment and less on infrastructure, healthcare, and education, potentially causing macroeconomic instability.

Household debt-led spending results from a gradual decline in household income.

African economies should emphasise that debt-led economic paradigms are contagious to their economic fragilities. Due to the debt-led model that enhances the industrialisation of nations where capital is supplied, many African nations have high debt-to-GDP ratios which adversely impact their domestic economies.

This is accomplished through institutional weakness and government inefficiency in public enterprises. Several decades ago, the Lagos Plan of Action for African Economic Growth adopted a wider regional strategy that focused primarily on collective self-reliance and taking action to reorganise the continent's economic base. As opposed to the logic of the IMFS architecture, which suggests that private investment should support economic growth, the Lagos Plan of Action supported government investment. To achieve this private sector hegemony, inflation must be stable and direct government intervention in the economy should be minimal while employment is forced to perpetuate poverty.

The fiscal and monetary system is currently subjected to austerity measures dictated by IMFS's growth policies, which are driven by reckless borrowing in the household, sovereign, and financial sectors, at the expense of labour and capital-intensive industries.

To become self-sufficient, Africa must take a risk and find an equitable alternative to the debt-led economic model—a fork in the road.

As long as Africa continues to rely on foreign debt to fund the drivers of economic growth, such as industrialisation and innovation, real growth remains elusive. Currency and debt stability are key factors in social stability in a country, but when the country is a great power with global reach, the IMFS itself is threatened, and thus, US instability adversely affect the entire world.

Since the current political developments in the US have a significant impact on the future of the IMFS, African nations must express their economic stance. The IMFS is clearly being misused as a weapon against African nations that negatively impact treaties, regulations, organisations, and standards.

Written by Bongani Mankewu, Director of the Infrastructure Finance Advisory Institute