The African Development Bank Institute (AfDBI) unveiled a new initiative on Thursday, aimed at addressing Africa’s debt challenges with home-grown solutions. The announcement came during the inauguration and first peer learning event in Addis Ababa, Ethiopia, themed ‘Developing and Deepening Domestic Debt Markets in Africa’.
In a statement posted on Friday, AfDBI Director Coulibaly Abdoulaye emphasized the network’s goal to provide tailored solutions to the continent’s debt issues. The initiative seeks to bolster the debt management capabilities of African officials and institutions, fostering macroeconomic stability and inclusive growth. It also aims to facilitate the exchange of experiences among debt managers in the region.
Eric Ogunleye, another key director at AfDBI, highlighted the escalating financing needs for infrastructure, poverty reduction, climate change mitigation, and security, which have led to increased borrowing by African nations, exacerbating debt vulnerabilities. Ogunleye noted that weak debt management has led to deteriorating macroeconomic outcomes and hindered effective policy responses to economic shocks, worsening debt distress in some countries.
“As of April 30, 2024, out of the 38 African countries with available debt sustainability assessment data, 13 are at high risk of debt distress, and 6 are already in debt distress,” Ogunleye stated. He pointed out that a significant portion of African debt is owed to external bondholders and non-Paris Club creditors, imposing an average debt servicing burden of 18 percent of total government revenue on African countries.
The event highlighted the importance of developing African domestic debt markets as a means to secure more affordable and stable debt financing for development needs. Discussions centered on creating robust debt management frameworks, networking, and peer learning to support debt sustainability.
Johan Krynauw, former Director of Debt Management at South Africa’s National Treasury, urged African countries to collaborate more closely to enhance knowledge-sharing and mutual support in debt management. He noted the shortcomings of external institutional initiatives in resolving Africa’s public finance and debt management issues, stressing the need for context-specific solutions developed by African debt managers working together.
The session brought together debt managers, heads of debt management offices, capital market operators, commercial bankers, and regulators, including securities and exchange commissions and central banks. Participants shared practical strategies for developing and deepening domestic debt markets across the continent, offering insights for countries with nascent or non-existent domestic debt markets.
This initiative represents a significant step towards strengthening Africa’s financial resilience and ensuring sustainable economic development through improved debt management practices.
- Tags: AfDBI, Africa, Coulibaly Abdoulaye, Debt
