The African Development Bank has warned that Africa’s ballooning external debt, which reached $824 billion in 2021, is posing serious challenges, with countries dedicating 65 per cent of their GDP to servicing these obligations.
The warning was voiced by AfDB President Akinwumi Adesina at the Semafor Africa Summit held last week in Washington on the sidelines of the International Monetary Fund and World Bank 2024 Spring Meetings
Adesina highlighted the challenges posed by Africa’s ballooning external debt, which reached $824 billion in 2021, with countries dedicating 65 per cent of their GDP to servicing these loans and pointed out that the continent would pay $74 billion in debt service payments this year alone, a sharp increase from $17 billion in 2010.
“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, because it complicates the debt issue and the debt resolution issue,” Adesina told journalist Yinka Adegoke.
The AfDB head stressed the importance of putting in place an orderly and predictable way of dealing with Africa’s debt, urging for faster implementation of the G20 Common Framework.
New frameworks to repay Africa’s $824Bn debt
He also highlighted the need for increased concessional financing, particularly for low-income countries. “What’s particularly interesting in Africa is that the level of concessional financing itself has actually gone down, has shrunk significantly,” he said, adding that the African Development Fund—AfDB’s concessional lending arm to low-income countries—is providing long-term financing at low interest rates to the 37 most vulnerable countries.
Adesina discussed various instruments and initiatives employed by the African Development Bank to de-risk projects and attract institutional investors, such as partial credit guarantees, hybrid capital, and synthetic securitization.
Adesina was upbeat about the opportunities in Africa, particularly in renewable energy, given the continent’s vast solar potential. He also highlighted the Africa Investment Forum, a platform created by the AfDB and its partners, that brings together investors from around the world to facilitate large-scale investments in key sectors like infrastructure, digital, and renewable energy.
“Africa is the best investment destination in the world,” Adesina insisted, emphasizing 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?”—brought together a range of participants for debates on the increasing debt burden faced by developing countries as borrowing costs have risen.
Other notable participants included Xavier Becerra, US Secretary of Health and Human Services; Raj Shah, President of the Rockefeller Foundation; Andrew Steer, President and CEO of the Bezos Earth Fund; and Brent Neiman Assistant Secretary for International Finance, US Treasury.