Africa’s massive debt load and the nature of many of its resource-backed loans are compromising its economic potential, the African Development Bank’s (AfDB) President Akinwumi Adesina said recently.
- •Countries on the continent are dedicating almost two thirds of their GDP to service debt, which reached a cumulative $824bn in 2021.
- •According to the AfDB, African countries will pay $74bn in debt servicing this year, up from just $17bn in 2010.
- •Eurobond debts now account for 44% of the total debt load, from an average of 14-17% before.
“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 said at the Semafor Africa Summit on the sidelines of the International Monetary Fund and World Bank2024 Spring Meetings.
Adesina also discussed the “Africa Premium” imposed on African markets accessing the global debt market. The ‘premium’ is imposed on perceived higher risk despite the fact that Africa’s default rates are lower than other regions.
Despite this perceived higher risk, Ivory Coast, Kenya and Benin have issued a total of nearly $5bn in bonds in 2024. A significant portion of the new debt is meant to pay off existing loans and interest, which have been significantly more expensive than concessional financing.
“What’s particularly interesting in Africa is that the level of concessional financing itself has actually gone down, has shrunk significantly,” Adesina said.