On Thursday, African Development Bank president Akinwumi Adesina said that non-transparent resource-backed loans were undermining Africa’s economic potential, complicating debt resolution and compromising countries’ future growth.

Mr 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.

He said the continent would pay $74 billion in debt service payments this year alone, a sharp increase from $17 billion in 2010, according to a statement issued Thursday by the AfDB.

While acknowledging the fiscal pressures African nations face due to the COVID-19 pandemic, infrastructure needs, and rising inflation, Adesina emphasised the need to address the structural issues in Africa’s debt landscape. He pointed out the shift from concessional financing to more expensive and short-term commercial debt, with Eurobond debt now accounting for 44 per cent of Africa’s total debt, up from 14 per cent to 17 per cent previously.

“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,” Mr Adesina said at the Semafor Africa Summit taking place on the sidelines of the International Monetary Fund and World Bank2024 Spring Meetings.

He also criticised the “Africa premium” countries pay when accessing capital markets despite data showing that Africa’s default rates are lower than those of other regions. He called for ending this risk perception, leading to higher borrowing costs for African nations.

The AfDB boss stressed the importance of implementing an orderly and predictable approach to managing Africa’s debt, urging faster implementation of the G20 Common Framework.

He also highlighted the need for increased concessional financing, particularly for low-income countries.

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

Mr Adesina discussed various instruments and initiatives the AfDB employed to de-risk projects and attract institutional investors, such as partial credit guarantees, hybrid capital, and synthetic securitisation.

Looking ahead, Mr Adesina expressed optimism about the opportunities in Africa, particularly in renewable energy, given the continent’s vast solar potential.

He also highlighted the Africa Investment Forum, a platform created by the bank and its partners that brings 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,” Mr Adesina added, emphasising the AfDB’s commitment to creating an enabling environment for investments to thrive.