African Development Bank president Akinwumi Adesina has sounded the alarm on the detrimental impact of non-transparent resource-backed loans on Africa’s economic potential. Africa’s growing external debt reached $824 billion in 2021, Adesina stated. This prompted countries to dedicate 65 percent of the gross domestic product to service those obligations.
Speaking at the Semafor World Economy Summit on the sidelines of the International Monetary Fund and World Bank 2024 Spring Meetings, Adesina stressed the urgent need for debt transparency. Moreover, he stresses the importance of accountability to address the complexities surrounding debt resolution and safeguard Africa’s future growth prospects. “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 ends,” he added.
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Challenges of Africa’s external debt
During the summit, Adesina stated that Africa will pay $74 billion in debt service payments this year alone. That is a sharp increase compared to $17 billion in 2010. Africa has faced rising fiscal challenges due to the COVID-19 pandemic, infrastructure needs and inflation. Therefore, Adesina emphasized the critical importance of addressing structural issues in Africa’s debt landscape. He calls for urgent action to mitigate the risks of non-transparent resource-backed loans and enhance debt transparency. Moreover, he stresses the importance of promoting sound financing practices to unlock Africa’s economic potential.
Moreover, Adesina underscored a concerning shift in financing trends, with African nations increasingly resorting to more expensive and short-term commercial debt, particularly through Eurobond issuance. Eurobond debt now accounts for 44 percent of Africa’s total debt. This represents a significant increase from previous levels of 14-17 percent.
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