Business

Africa’s Economic Potential, Future Growth Compromised By ‘Opaque’ $824bn Debt, Says Adesina

President of the African Development Bank (AfDB), Akinwumi Adesina, has stated that Africa’s immense economic potential is being undermined by non-transparent resource-backed loans that complicate debt resolution and compromise countries’ future growth.

Adesina spoke at the Semafor Africa Summit titled: Rising Global Middle Class: Is Rising Developing Nation Debt a Blessing or a Curse?” which took place on the sidelines of the International Monetary Fund (IMF) and World Bank 2024 Spring Meetings in Washington, USA.

Adesina highlighted the challenges posed by Africa’s ballooning external debt, which reached $824 billion in 2021, with countries dedicating 65 percent of their Gross Domestic Product (GDP) to servicing the obligations.

He said the continent would pay $74 billion in debt service payments this year alone, a sharp increase from $17 billion in 2010.

“I think it is time for us to have debt transparency accountability and make sure that this whole thing, these opaque natural resource-backed loans actually end, because they complicate the debt issue and the debt resolution issue,” he stated.

While acknowledging the fiscal pressures faced by African nations due to the Covid-19 pandemic, infrastructure needs, and rising inflation, Adesina explained 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 percent of Africa’s total debt, up from 14-17 percent previously.

He also criticised 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.

He called for an end to the risk perception, which he said leads to higher borrowing costs for African nations.

The AfDB president 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. 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,” he disclosed.

Adesina discussed various instruments and initiatives employed by the AfDB to de-risk projects and attract institutional investors, such as partial credit guarantees, hybrid capital, and synthetic securitisation.

Looking ahead, Adesina expressed optimism about the opportunities in Africa, particularly in renewable energy, given the continent’s vast solar potential.

He also disclosed that the Africa Investment Forum, a platform created by the Bank and its partners, that brings together investors from around the world to facilitate large-scale investments in key sectors like infrastructure, digital, and renewable energy.

“Africa is the best investment destination in the world,” Adesina concluded, emphasising the AfDB’s commitment to creating an enabling environment for investments to thrive.

The Semafor summit brought together a range of participants for conversations on the increasing debt burden faced by developing countries as borrowing costs have risen.

Other notable participants included Xavier Becerra, US Secretary of Health and Human Services; Raj Shah, President of the Rockefeller Foundation; Andrew Steer, President and CEO of the Bezos Earth Fund; and Brent Neiman Assistant Secretary for International Finance, U.S. Treasury.

Shah emphasised the importance of balancing developing countries economic needs with the need for climate action.

Ugo Aliogo

Follow us on:

AriseNews

Recent Posts

Gatwick Airport South Terminal Evacuated, Bomb Disposal Team Deployed Suspicious Item Found In Luggage

Gatwick Airport's South Terminal was evacuated after a suspected prohibited item was found, prompting bomb…

5 mins ago

Trump Considers Kevin Warsh for Treasury Secretary, Role Of Chairman Of Federal Reserve

Trump is considering Kevin Warsh for Treasury Secretary, with a future possibility of him becoming…

3 hours ago

Hyundai Recalls 145,235 Electrified Vehicles In The US Due To Power Loss Issue

Hyundai has recalled 145,235 electrified vehicles in the US. due to potential loss of drive…

3 hours ago

‘We’re Going to Begin to License Actors’, Says AGN President in A Bid For Standardisation

AGN president Rollas has stressed the need for actor licensing to ensure fair compensation and…

3 hours ago

EU Closes Antitrust Investigation Into Apple’s App Store Rules After Complaint Withdrawal

EU regulators has closed a four-year investigation into Apple's App Store rules after the complainant…

3 hours ago

IPOB Denounces Simon Ekpa As A ‘Destructive Agent’, Clarifies He Was Never A Member Of The Group

IPOB distanced itself from Simon Ekpa, calling him a “destructive agent” who infiltrated and destabilised…

4 hours ago