$824b Debt Burden, Resource-backed Loans Hinder Africa’s Potential - AfDB

African Development Bank (AfDB) President, Dr Akinwumi Adesina, has explained that Africa’s immense economic potential is being undermined by non-transparent resource-backed loans that complicate debt resolution and compromise countries’ future growth.

While speaking at the Semafor Africa Summit taking place on the sidelines of the International Monetary Fund and World Bank 2024 Spring Meetings, Adesina said, “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 ends because it complicates the debt issue and the debt resolution issue.”

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 obligations.

While acknowledging the fiscal pressures faced by African nations due to the COVID-19 pandemic, infrastructure needs, and rising inflation, Adesina also expressed the significance to tackle the structural issues in Africa’s debt landscape.

He further explained 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..

“What’s particularly interesting in Africa is that the level of concessional financing itself has gone down, has shrunk significantly,” he stated, adding that the African Development Fund – the Bank Group’s concessional lending arm to low-income countries – is providing long-term financing at low-interest rates to the 37 most vulnerable countries.

Further speaking, Adesina expressed optimism about the opportunities in Africa, particularly in renewable energy, given the continent’s vast solar potential. He explained that the Africa Investment Forum, a platform created by the bank and its partners will bring 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,” he concluded, also expressesing the African Development Bank’s commitment to creating an enabling environment for investments to thrive.