Akinwumi Adesina, President of the African Development Bank, delivered a poignant address at the Semafor Africa Summit, held alongside the International Monetary Fund and World Bank 2024 Spring Meetings. Expressing grave concerns over the detrimental impact of non-transparent resource-backed loans on African economies, Adesina called for heightened debt transparency and accountability to avert future crises.
During his speech, Adesina underscored the complexities arising from these opaque loans, which not only hinder debt resolution but also jeopardize the future growth prospects of African nations. He emphasized the urgent need for structural reforms in Africa’s debt landscape amidst staggering debt figures, with external debt reaching a staggering $824 billion in 2021.
Highlighting the continent’s daunting debt service payments, Adesina revealed that African countries are dedicating a significant 65 per cent of their GDP to service these obligations, with an estimated $74 billion earmarked for debt servicing in the current year alone – a stark surge from $17 billion in 2010.
Adesina further lamented the shift towards more expensive and short-term commercial debt, particularly Eurobond debt, now constituting 44 per cent of Africa’s total debt. Despite Africa’s comparatively lower default rates, he criticized the prevailing ‘Africa premium,’ which unnecessarily inflates borrowing costs for African nations.
Drawing attention to the imperative of changing risk perceptions, Adesina urged for expedited implementation of the G20 Common Framework to ensure an orderly and predictable approach to debt management. He also advocated for increased concessional financing, citing the crucial role of institutions like the African Development Fund in providing long-term, low-interest financing to vulnerable countries.
Adesina outlined various instruments and initiatives employed by the African Development Bank to mitigate risks and attract institutional investors, including partial credit guarantees and synthetic securitization. Expressing optimism about Africa’s potential, particularly in renewable energy, he highlighted the Africa Investment Forum as a pivotal platform for fostering large-scale investments in critical sectors.
Concluding his address on an optimistic note, Adesina reiterated Africa’s appeal as a prime investment destination, reaffirming the African Development Bank’s unwavering commitment to creating a conducive environment for sustainable investments.
The Semafor Summit’s session, titled “Rising Global Middle Class: Is Rising Developing Nation Debt a Blessing or a Curse?”, convened esteemed participants including 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 U.S. Treasury Brent Neiman for in-depth discussions on the escalating debt burden faced by developing nations amidst rising borrowing costs.
