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Africa's $824 billion debt crisis: AfDB president calls for transparency and reform

Saturday April 20, 2024

Dr Akinwumi Adesina (right) warns of the impact of non-transparent resource-backed loans on Africa's debt burden. Semafor Summit, Washington DC

Mogadishu (HOL) - African Development Bank President Akinwumi Adesina issued a stark warning, emphasizing the potential for Africa's $824 billion debt to smother the continent's economic future. His remarks, delivered at the Semafor World Economy Summit during the International Monetary Fund and World Bank 2024 Spring Meetings in Washington DC, drew attention to the detrimental effects of non-transparent, resource-backed loans on debt issues and economic growth.

Adesina detailed how these loans obscure financial dealings and complicate debt resolution. He advocated for an end to these practices to foster more transparent, more accountable borrowing processes. During his address, he also noted the dramatic rise in Africa's external debt, which reached $824 billion by 2021. Debt service payments soaring from $17 billion in 2010 to an expected $74 billion this year have forced nations to dedicate 65% of their GDP to servicing debt.

The bank president highlighted a shift from concessional, longer-term loans to more expensive, short-term commercial borrowing, pointing out that Eurobond debt now makes up 44% of the continent's total debt, a significant rise from 14-17% in earlier years. He also called attention to the "Africa premium"—higher interest rates imposed on African nations due to perceived risks despite their lower default rates compared to other regions.

In response to these challenges, Adesina urged for a structured and predictable method to handle Africa's debt and called for expedited implementation of the G20 Common Framework. He stressed the need for more concessional financing for low-income countries, highlighting the African Development Fund's role in providing sustainable financing at lower interest rates.

The summit also featured insights from other prominent figures like U.S. Secretary of Health and Human Services Xavier Becerra, Rockefeller Foundation President Raj Shah, Bezos Earth Fund President Andrew Steer, and U.S. Treasury Assistant Secretary for International Finance Brent Neiman. Discussions centred around economic sustainability, climate action, and the complexities of increasing debt amid rising borrowing costs in developing nations.

Shah discussed the balance between economic needs and environmental actions, explicitly referencing a project to transition South Africa's Komati coal-fired power station to renewable energy. Neiman touched on the U.S. government's efforts to help African countries manage their debt, noting recent successful bond issues by nations like Côte d'Ivoire, Benin, and Kenya.

These discussions highlighted the urgent need for reform and support to manage the growing debt crisis and leverage Africa's economic opportunities, particularly in renewable energy sectors where the continent holds significant potential.


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