Amidst the backdrop of mounting concerns over Africa’s ballooning external debt, Akinwumi Adesina, the President of the African Development Bank (AfDB), has emphatically called for greater debt transparency to protect the continent’s economic growth trajectory.
In his address at the Semafor Africa Summit, held alongside the International Monetary Fund and World Bank 2024 Spring Meetings, Adesina highlighted the detrimental impact of non-transparent resource-backed loans on African economies.
He stressed that such loans not only complicate debt resolution but also jeopardize countries’ future growth prospects.
Adesina explained the urgent need for accountability and transparency in debt management, citing the continent’s debt burden of $824 billion as of 2021.
With countries dedicating a significant portion of their GDP to servicing these obligations, Adesina warned that the current trajectory could hinder Africa’s development efforts.
One of the key concerns raised by Adesina was the shift from concessional financing to more expensive and short-term commercial debt, particularly Eurobonds, which now constitute a substantial portion of Africa’s total debt.
He criticized the prevailing ‘Africa premium’ that raises borrowing costs for African countries despite their lower default rates compared to other regions.
Adesina called for a paradigm shift in the perception of risk associated with African investments, advocating for a more nuanced approach that reflects the continent’s economic potential.
He stated the importance of an orderly and predictable debt resolution framework, called for the expedited implementation of the G20 Common Framework.
The AfDB President also outlined various initiatives and instruments employed by the bank to mitigate risks and attract institutional investors, including partial credit guarantees and synthetic securitization.
He expressed optimism about Africa’s renewable energy sector and highlighted the Africa Investment Forum as a catalyst for large-scale investments in critical sectors.