$824bn resource-backed loans slowing Africa’s growth – AfDB president

The President of the African Development Bank, Akinwumi Adesina, has said that non-transparent resource-backed loans that complicate debt resolution and compromise countries’ future growth are undermining African economic potential.

According to a statement from the bank on Wednesday, Adesina said this at the Semafor Africa Summit, taking place on the sidelines of the International Monetary Fund and World Bank 2024 Spring Meetings.

“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 highlighted the challenges posed by Africa’s ballooning external debt, which reached $824bn in 2021, with countries dedicating 65 per cent of their GDP to servicing these obligations.

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

While acknowledging the fiscal pressures faced by African nations due to the COVID-19 pandemic, infrastructure needs, and rising inflation, 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.

The AfDB boss also criticised the ‘Africa premium’ that countries pay when accessing capital markets, despite data showing that Africa’s default rates were lower than those of other regions.

He demanded that the risk perception be changed, as it has been driving up borrowing costs for African countries.

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