President of the African Development Bank (AfDB), Dr Akinwumi Adesina, has said the debt-to-Gross Domestic Product (GDP) ratio of African economies on average is expected to climb by 10 per cent to 15 per cent in the short to medium-term.
According to Dr Adesina, the expected increment in debts presents serious challenges to African economies adding disorderly debt defaults and resolutions can become a major obstacle to Africa’s full recovery from the Covid pandemic and progress towards prosperity.
In the 2021 African Economic Outlook themed From Debt Resolution to Growth: The Road Ahead for Africa, Dr Adesina posits that to build resilient African economies post Covid-19, Africa’s debt and development finance challenges must be addressed in partnership with the international community.
“Global partnership efforts are being made by the G20 to support temporary debt relief for developing countries through the Debt Service Suspension Initiative. However, debt payments are only deferred, and the initiative covers only a small fraction of Africa’s total bilateral debt. Much larger financial support is needed, and the private sector creditors need to be part of the solution,” he stated.
Further calling for a ‘one last time debt relief for Africa.’
He however, cautioned against the use of complicated debt instruments by creditors of African countries in the debt restructuring process noting that recent debt restructuring experiences in Africa have been costly and lengthy due to information asymmetries and creditor coordination problems.
Meanwhile the African Development Bank (AfDB) has said it expects African economies to grow by an average rate of 3.4 per cent this year after a 2.1 per cent contraction experienced last year.
The worst contraction experienced by the continent in half a century.
The 2021 African Economic Outlook report examines current challenges in the international architecture for debt resolution. It discusses legal reforms, financial innovation, enhanced global coordination, and expanding the toolkit available to international financial institutions as possible ways to fix that architecture.
