AFRICA needs quicker debt restructurings, more favourable lending terms, and an additional $25bn for the Africa Development Fund to avoid a lost decade, the head of its development bank, Akinwumi Adesina, said on Friday.
Speaking at London’s Chatham House, Adesina highlighted that the continent is experiencing a ‘long fiscal Covid,’ and the world is not doing enough to help it recover from the pandemic and global interest rate hikes that have pushed several countries into default. ‘The G20 Common Framework, which is the bilateral and multilateral path to debt restructuring, must work faster for Africa,’ Adesina stated. ‘We can’t afford to have a lost decade.’
Adesina called for a $25bn replenishment of the African Development Fund, the concessional arm of the African Development Bank that lends to vulnerable countries. The last replenishment committed $8.9bn for the 2023–2025 financing cycle, the largest in its history.
Zambia recently became the first country to finalise a debt rework under the Common Framework, a format developed by the G20 to help poor countries renegotiate unsustainable debt with all creditors, including China. However, Zambia’s process took nearly four years, a duration criticised as excessively long.
Adesina noted that Ghana and Ethiopia are also in default, and 22 African countries are at high risk of debt distress, with debt servicing payments projected to reach $74bn this year, up from $17bn in 2010. ‘This is because concessional financing has declined,’ he explained. ‘You can’t do development at commercial rates. We have to ensure that the global financing system delivers more for Africa and avoid economic divergences due to slow economic recovery from Covid.’
Adesina said the Common Framework needs to include speedier constitution of credit committees and suggested that the Paris Club, a traditional group of mainly Western creditor governments, needs permanent expansion. ‘The Paris Club was all about concessional lenders. But the world has changed,’ he said, emphasising that an expanded Paris Club would facilitate faster dialogue and resolution.
In 2010, 57 percent of Africa’s debt came from concessional financing, whereas today it is around 25 percent, with the proportion from commercial lenders and bonds rising from 17 percent to 55 percent.
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