The President of the African Development Bank, Akinwumi Adesina, stated that Africa’s potential for future economic growth is being undermined by inefficient resource-backed loans which exacerbate debt resolution and compromise countries.
This disclosure was made in a statement by Adesina at the Semafor Africa Summit, taking place on the sidelines of the International Monetary Fund and World Bank 2024 Spring Meetings, on Wednesday, according to The Punch.
Adesina underlined that, with countries committed to servicing these obligations at 65 per cent of their GDP, the challenges faced by Africa as a result of an increase in foreign debt amounting to $824 billion from 2021 are a concern.
He says that this year alone, the continent will be paying $74 billion in debt service payments, compared with $17 billion a year ago.
“I think it is time for us to have debt transparency accountability and make sure that this whole thing of these opaque natural resource-backed loans ends because it complicates the debt issue and the debt resolution issue,” Adesina told Semafor Africa.
Adesina stressed the need to deal with Structural Issues in Africa’s debt situation, even as he acknowledged that African countries were facing budgetary pressures from a COVID-19 pandemic, infrastructure needs, and increasing inflation.
The AfDB boss highlighted the shift from concessional financing to a more expensive and short-term commercial debt, with Eurobond debt which now accounts for 44 per cent of Africa’s total debt.
He also condemned the ‘Africa premium’ that countries pay when accessing capital markets, given that Africa’s default rates were lower than those of other regions.
Given the increased borrowing costs for African countries, he demanded that this risk perception be reassessed.
“What is particularly interesting in Africa is that the level of concessional financing itself has gone down, (it) has shrunk significantly,” he said.
Adesina also emphasised the importance of ensuring an orderly and predictable way to deal with Africa’s debt calling for the rapid implementation of the G20 joint framework.
