Africa Development Bank (AfDB) wants an additional $25 billion for the Africa Development Fund to avert a “lost decade” and swifter debt restructurings with more favorable lending terms.
This is according to Akin Adesina, the head of AfDB who spoke at London’s Chatham House on Friday.
Adesina revealed the continent’s struggle with a “long fiscal COVID” and criticized the global response to the economic challenges exacerbated by the pandemic and rising global interest rates, which have led several African nations into default.
Replenishment Kitty
“The G20 Common Framework, which is the bilateral and multilateral path to do (debt restructuring), must work faster for Africa,” Adesina stated adding that “we can’t afford to have a lost decade.”
Adesina called for a $25 billion replenishment of the African Development Fund, the concessional financing arm of the AfDB, which committed a record $8.9 billion for the 2023-2025 cycle during its last replenishment.
This appeal follows Zambia’s recent milestone as the first nation to finalize a debt rework under the G20’s Common Framework, a process that took nearly four years, which many, including Zambian leaders, deem excessively lengthy.
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Risk of Debt Distress
Ghana and Ethiopia are currently in default, and Adesina warned that 22 African countries are at high risk of debt distress. He projected debt servicing payments to reach $74 billion this year, a significant rise from $17 billion in 2010.
“This is because concessional financing has declined,” Adesina explained. “You can’t do development at commercial rates. We have to make sure that the global financing system delivers more for Africa and avoid economic divergences that are coming about because of slow economic recovery in Africa from COVID.”
Adesina reiterated the need for the Common Framework to include faster formation of credit committees and suggested a permanent expansion of the Paris Club, the traditional assembly of primarily Western creditor governments.
