Africa's immense economic potential is being hindered by non-transparent resource-backed loans, as highlighted by African Development Bank President Akinwumi Adesina. Speaking at the Semafor World Economy Summit, Adesina emphasized the need for debt transparency and accountability, stating, "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 drew attention to the challenges posed by Africa's growing external debt, which reached $824 billion in 2021, with countries dedicating 65% of their GDP to servicing these obligations. He noted that African nations are facing significant fiscal pressures due to various factors, including the Covid-19 pandemic, infrastructure needs, and rising inflation. Adesina pointed out the shift from concessional financing to more expensive commercial debt, with Eurobond debt now accounting for 44% of Africa's total debt.
The African Development Bank President also criticized the "Africa premium" that countries pay when accessing capital markets, calling for an end to this risk perception to reduce borrowing costs. He stressed the importance of establishing an orderly and predictable way to address Africa's debt, advocating for increased concessional financing for low-income countries.
Adesina expressed optimism about the opportunities in Africa, particularly in renewable energy, and highlighted the Africa Investment Forum as a platform to facilitate large-scale investments in key sectors. He concluded by affirming Africa's potential as an investment destination and the Bank's commitment to creating an enabling environment for investments to thrive.
During the summit, other participants shared their perspectives on the increasing debt burden faced by developing countries. Raj Shah, President of the Rockefeller Foundation, emphasized the need to balance economic needs with climate action, citing efforts to transition from coal-fired power stations to renewable energy.
Brent Neiman, Assistant Secretary for International Finance at the U.S. Treasury, discussed the U.S. government's efforts to assist African countries in reducing debt loads, noting that emerging economies continue to tap capital markets. He highlighted the Global Sovereign Debt Roundtable as instrumental in bringing together creditors and debtors to tackle rising debt burdens in developing countries.
Adesina is currently in Washington to attend the 2024 International Monetary Fund/World Bank Spring Meetings.
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