The African Development Bank (AfDB) is calling for a $25 billion replenishment of its African Development Fund and more favorable lending terms to help the continent recover from the economic impacts of the COVID-19 pandemic and global interest rate hikes. AfDB President Akinwumi Adesina highlighted the urgent need for international support to avoid what he describes as a potential ‘lost decade’ for Africa.
Speaking at London’s Chatham House, Adesina discussed the prolonged economic challenges Africa faces, which he referred to as “long fiscal COVID”. He pointed out that current international efforts are insufficient to address the severe financial strains caused by the pandemic and rising debt levels. Adesina emphasized the need for faster debt restructurings through the G20 Common Framework, which is designed to assist countries in renegotiating unsustainable debt. “We can’t afford to have a lost decade,” he stated.
Adesina’s call for a $25 billion replenishment aims to bolster the African Development Fund, the AfDB’s concessional lending arm that assists vulnerable countries. The previous replenishment saw a historic commitment of $8.9 billion for the 2023-2025 financing cycle, highlighting the increasing financial needs.
The debt crisis in Africa is severe, with Zambia recently becoming the first country to complete a debt restructuring under the G20’s Common Framework, albeit after nearly four years. Other countries like Ghana and Ethiopia are also in default, and 22 African nations are at high risk of debt distress. Debt servicing payments are expected to rise to $74 billion this year, a significant jump from $17 billion in 2010.
Adesina noted the decline in concessional financing, which has dropped from 57% of Africa’s debt in 2010 to about 25% currently, while the share of debt from commercial lenders and bonds has increased from 17% to 55%. “You can’t do development at commercial rates,” he argued, calling for a global financial system that better supports Africa’s recovery.
To expedite the Common Framework, Adesina proposed faster formation of credit committees and suggested expanding the Paris Club, traditionally a group of mainly Western creditor governments, to include a broader range of creditors. “The Paris Club was all about concessional lenders. But the world has changed,” he said, advocating for an inclusive approach to speed up debt resolution discussions.
The AfDB’s urgent request for $25 billion and more flexible lending terms is a critical call to the international community. Swift action is necessary to prevent a prolonged period of economic stagnation in Africa, ensuring continued development and prosperity for the continent.
Photo source: Google
By: Montel Kamau
Serrari Financial Analyst
10th June, 2024
