By Adedapo Adesanya
The President of the African Development Bank (AfDB), Mr Akinwumi Adesina, has kicked against resource-backed loans that complicate debt resolution and compromise African countries’ future growth.
Speaking at the just-concluded International Monetary Fund and World Bank2024 Spring Meetings, he said Africa’s immense economic potential is being undermined by non-transparent resource-backed loans.
“I think it’s time for us to have debt transparency accountability and make sure that this whole thing of these opaque natural resource-backed loans actually end because they complicate the debt issue and the debt resolution issue,” Mr Adesina told journalist, Mr Yinka Adegoke at the Semafor Africa Summit that took place on the sidelines of the meetings last Thursday.
According to a statement, Mr Adesina highlighted the challenges posed by Africa’s ballooning external debt, which reached $824 billion in 2021, with countries dedicating 65 per cent of their GDP to servicing these obligations.
He said the continent would pay $74 billion in debt service payments this year alone, a sharp increase from $17 billion in 2010.
While acknowledging the fiscal pressures faced by African nations due to the COVID-19 pandemic, infrastructure needs, and rising inflation, Mr Adesina emphasised the need to address the structural issues in Africa’s debt landscape.
He pointed out the shift from concessional financing to more expensive and short-term commercial debt, with Eurobond debt now accounting for 44 per cent of Africa’s total debt, up from 14-17 per cent previously.
He also criticized the “Africa premium” that countries pay when accessing capital markets, despite data showing that Africa’s default rates are lower than those of other regions and called for an end to this risk perception, which he said leads to higher borrowing costs for African nations.
The AfDB head stressed the importance of putting in place an orderly and predictable way of dealing with Africa’s debt, urging for faster implementation of the G20 Common Framework.
He also highlighted the need for increased concessional financing, particularly for low-income countries.
“What’s particularly interesting in Africa is that the level of concessional financing itself has actually gone down, has shrunk significantly,” he said, adding that the African Development Fund—the bank group’s concessional lending arm to low-income countries—is providing long-term financing at low-interest rates to the 37 most vulnerable countries.