Akinwumi Adesina, the President of the African Development Bank (AfDB), has raised concerns over the detrimental impact of non-transparent resource-backed loans on Africa’s economic growth trajectory. Speaking at the Semafor Africa Summit, held alongside the International Monetary Fund and World Bank 2024 Spring Meetings, Adesina emphasized the need for debt transparency and accountability to address structural issues in Africa’s debt landscape.
Adesina highlighted Africa’s ballooning external debt, which surged to $824 billion in 2021, with countries allocating 65% of their GDP to debt servicing. He pointed out that Africa faces a daunting task of paying $74 billion in debt service payments in 2024 alone, compared to $17 billion in 2010. Adesina underscored the urgency of addressing the continent’s debt challenges, exacerbated by factors such as the COVID-19 pandemic, infrastructure needs, and rising inflation.
The AfDB president expressed concern over the shift from concessional financing to more expensive commercial debt, with Eurobond debt now accounting for 44% of Africa’s total debt. He criticized the ‘Africa premium’ that countries pay when accessing capital markets, despite lower default rates compared to other regions. Adesina urged for a change in risk perception to lower borrowing costs for African countries.
Adesina called for an orderly and predictable approach to managing Africa’s debt and emphasized the importance of faster implementation of the G20 Common Framework. He highlighted the role of the African Development Fund in providing long-term financing at low interest rates to vulnerable countries and outlined various initiatives to de-risk projects and attract institutional investors.
Looking ahead, Adesina expressed optimism about Africa’s opportunities, particularly in renewable energy, citing the continent’s vast solar potential. He highlighted the Africa Investment Forum as a platform to facilitate large-scale investments in critical sectors like infrastructure and digital.
In conclusion, Adesina reiterated Africa’s appeal as an investment destination and the AfDB’s commitment to creating an enabling environment for investments to thrive. The Semafor Summit session, titled “Rising Global Middle Class: Is Rising Developing Nation Debt a Blessing or a Curse?” convened participants from diverse backgrounds to discuss the escalating debt burden faced by developing countries amidst rising borrowing costs.
Among the notable participants were U.S. Secretary of Health and Human Services Xavier Becerra, President of the Rockefeller Foundation Raj Shah, President and CEO of the Bezos Earth Fund Andrew Steer, and Assistant Secretary for International Finance at the US Treasury Brent Neiman.
