During a prominent African economic conference in Kenya this week, leaders emphasized the urgent need for reforms in the global financial system, labeling it as “unjust” for penalizing African nations with high borrowing rates.
This sentiment echoes mounting concerns as African countries grapple with daunting levels of debt to fuel their development efforts, compounded by frequently volatile exchange rates.
The African Development Bank (AfDB) projects a modest 3.7 percent expansion in the continent’s overall economy this year, a commendable feat given global circumstances but deemed inadequate in light of population growth. Under the theme “Transforming Africa” at this year’s AfDB annual meetings in Nairobi, Kenyan President William Ruto underscored the necessity of vast financial resources for governments across the continent.
Ruto lamented the inherent disparities within the global financial architecture, asserting that African nations are compelled to borrow from capital markets at exorbitant rates, often eight to ten times higher than those paid by other countries.
Despite being a regional economic powerhouse, Kenya recently secured $1.5 billion through a new Eurobond issuance at an interest rate of approximately 10 percent, sharply contrasting with the roughly three percent yield on 10-year French government bonds.
Akinwumi Adesina, the president of AfDB from Nigeria, echoed these sentiments, criticizing the “Africa risk premium” that imposes higher borrowing costs on African nations compared to others with similar credit ratings. He highlighted projections indicating that fair estimation of Africa’s risks could result in annual savings of $75 billion in debt service costs, according to the UN Development Programme.
Adesina further noted Africa’s resilient economic growth, estimating real gross domestic product (GDP) growth at 3.7 percent for the current year and projecting a rise to 4.3 percent in 2025, despite facing numerous challenges.
However, Ruto cautioned that despite these positive indicators, African development continues to lag significantly behind its potential, emphasizing the imperative for systemic changes in the global financial framework.
