AfDB president calls for fair prices for loans to Africa

Dr. Akinwumi Adesina, PHOTO | AfDB

The African Development Bank (AfDB) has challenged global financiers to reform their financial systems to support the continent in its growth transformation.

Speaking at the 2024 AfDB Annual Meetings in Nairobi, AfDB President Dr Akinwumi Adesina said the current global financial architecture as established has left Africa at a disadvantage amid glaring funding gaps for the infrastructure development, food security, energy and climate change.

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“It’s not just architecture that needs to change, the people in architecture need to change too. We need to find a way to work together collaboratively, work creatively and effectively to achieve great results,” said Dr. Adesina.

According to the bank, poor ratings and credit downgrades applied to sovereign bonds of African countries have resulted in higher interest rates compared to their counterparts in other markets.

For example, the bank says that in 2021, African sovereign Eurobonds were issued with yields above 5 percent and, in 40 percent of cases, exceeded 8 percent.

“In contrast, the average sovereign bond yield for advanced economies was 1.1 percent and 4.9 percent for emerging market economies. “As a result, it has been estimated that African countries are paying 500% more in interest when borrowing in international capital markets compared to the rates that could be obtained with loans from the World Bank,” the bank said.

As a result of the COVID-19 pandemic, the war between Russia and Ukraine and the tightening of global monetary conditions, African countries have been forced to battle inflation and currency depreciations that have further increased their debt burdens. .

“There is a need for a fairer assessment of Africa’s risk because the United Nations Development Program shows that if Africa’s risks are properly and fairly calculated, African countries will save $75 a year on health insurance.” debt they owe,” Dr. Adesina said while addressing the press at the annual meetings in Nairobi Kenya.

This year, African countries are expected to pay at least US$74 billion in debt service, up from S$17 billion in 2010, mainly due to tighter global financial conditions.